SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
the Securities Exchange Act of 1934 (Amendment No. )
| Black Hills Corporation | ||||
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Proposal Corporate Governance Meetings and Committees of the Board Director Compensation Security Ownership of Management and Principal Shareholders Proposal Fees Paid to the Independent Registered Public Accounting Firm Audit Committee Report Executive Compensation Compensation Discussion and Analysis Compensation Committee Report Summary Compensation Table Grants of Plan Based Awards in Outstanding Equity Awards at Fiscal Year-End Option Exercises and Stock Vested During Pension Benefits for Nonqualified Deferred Compensation for Potential Payments Upon Termination or Change in Control Proposal Transaction of Other Business Shareholder Proposals for Shared Address Shareholders Annual Report on Form 10-K Notice Regarding Availability of Proxy Materials Corporation is soliciting your proxy. November 22, 2012. May This means that the three nominees with the largest number of votes “For” will be elected as directors. A properly executed proxy marked “Withhold authority” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether a quorum is present. Board of Directors. 2008. from 2007 to February 2012. serving as www.blackhillscorp.com/corpgov.htm). 2011. the Board and the CEO, and discusses, to the extent appropriate, matters raised by the independent directors in executive session. The Presiding Director also consults with the Chairman regarding meeting agendas and presides over regular meetings of the Board in the absence of the Chairman. This leadership structure provides consistent and effective oversight of our management and our Company. Board of Directors on a regular basis. us. general matter, it is our preference to avoid related party transactions. Nevertheless, we recognize that there are situations where related party transactions may be in, or may not be inconsistent with, the best interests of compensation. 1, 2012. Directors and Named Executive Officers Anthony S. Cleberg(4) * David C. Ebertz David R. Emery(5) Jack W. Eugster Linden R. Evans Steven J. Helmers John R. Howard Kay S. Jorgensen Stephen D. Newlin Thomas M. Ohlmacher Gary L. Pechota Rebecca B. Roberts Warren L. Robinson(6) John B. Vering(7) Thomas J. Zeller(8) All directors and executive officers as a group (17 persons) Five Percent Shareholders BlackRock, Inc.(1) Dos Mil Doscientos Uno, Ltd.(2) State Street Corporation(3) Audit Fees Audit Fees Audit-Related Fees Audit-Related Fees Tax Fees Tax Fees Total Fees This Compensation Discussion and Analysis describes our overall executive compensation policies and practices and specifically explains the compensation-related actions taken with respect to Officer; We made substantial progress on our strategic initiatives in for the year and 46 percent for the three-year period. At our experience, the level and nature of the holdings. David R. Emery, CEO Anthony S. Cleberg, CFO Linden R. Evans, COO-Utilities Thomas M. Ohlmacher, COO-Non-regulated Energy Steven J. Helmers, Sr. Vice President and General Counsel overall corporate success. The CEO COO-Utilities Sr. Vice President and General Counsel ” Minimum Target Maximum 29 align the interests of management with those of our shareholders. The Committee selected total shareholder return as the performance goal for the performance shares because it believes executive pay under a long-term, capital accumulation program should mirror our performance in shareholder return as compared to our peer group of companies. David R. Emery, CEO Anthony S. Cleberg, CFO Linden R. Evans, COO-Utilities Thomas M. Ohlmacher, COO-Non-regulated Energy Steven J. Helmers, Sr. Vice President and General Counsel David R. Emery, CEO Anthony S. Cleberg, CFO Linden R. Evans, COO-Utilities Steven J. Helmers, Sr. Vice President and General Counsel beginning of the plan period. Entitlement to performance shares is based on our total shareholder return over designated performance periods, as measured against our peer group. The peer group for the performance plan is the same as our peer group used for our market compensation analysis and is listed on page January 1, 2009 to December 31, 2011 January 1, 2007 to December 31, 2009 January 1, 2006 to December 31, 2008 January 1, 2005 to December 31, 2007 David R. Emery Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher * Steven J. Helmers The ownership guidelines and current stock ownership of our Named Executive Officers as of March David R. Emery, CEO Anthony S. Cleberg, CFO Linden R. Evans, COO-Utilities Thomas M. Ohlmacher, COO-Non-regulated Energy Steven J. Helmers, Sr. Vice President and General Counsel Retirement 2011. qualified plans. The level of retirement benefits provided by the Pension Plan and Nonqualified Plans for each of our Named Executive Officers is reflected in the Pension Benefits for We provide a limited number of other personal benefits to our executive officers, including personal use of a Company vehicle. The total value of these benefits in 2011 did not exceed $11,000 for any one of our Named Executive Officers and are disclosed in the Summary Compensation Table David R. Emery David R. Emery Chairman, President and Chief Executive Officer Anthony S. Cleberg Anthony S. Cleberg Executive Vice President and Chief Financial Officer Linden R. Evans Linden R. Evans President and Chief Operating Officer—Utilities Thomas M. Ohlmacher President and Chief Operating Officer—Non-regulated Energy Steven J. Helmers Steven J. Helmers Senior Vice President and General Counsel David R. Emery Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher Steven J. Helmers David R. Emery Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher Steven J. Helmers David R. Emery Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher Steven J. Helmers David R. Emery Thomas M. Ohlmacher Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher Steven J. Helmers Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher Steven J. Helmers David R. Emery Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher Steven J. Helmers David R. Emery Defined Benefit Pension Plan Pension Restoration Benefit Grandfathered Pension Equalization Plan 2005 Pension Equalization Plan Anthony S. Cleberg Defined Benefit Pension Plan Pension Restoration Benefit Linden R. Evans Defined Benefit Pension Plan Pension Restoration Benefit Thomas M. Ohlmacher Defined Benefit Pension Plan Pension Restoration Benefit Grandfathered Pension Equalization Plan 2005 Pension Equalization Plan Steven J. Helmers Defined Benefit Pension Plan Pension Restoration Benefit Grandfathered Pension Equalization Plan 2005 Pension Equalization Plan Our employees do not contribute to the plan. The amount of the annual contribution by us to the plan is based on an actuarial determination. she begins receiving benefits prior to age 65. For example, a participant who leaves beneficiary or estate, commencing at the earliest of death or when the employee is both retired and 62 years of age or more. A participant with vested benefits who is 55 years of age or older and who is no longer David R. Emery Anthony S. Cleberg Linden R. Evans Thomas M. Ohlmacher(5) Steven J. Helmers As of January 1, 2012, Messrs. Cleberg, Evans and Myers are 40 percent vested in the plan and Mr. Helmers is 100 percent vested. The amounts shown below assume that such termination was effective as of December 31, David R. Emery • Retirement • Death or disability • Involuntary termination • CIC • Involuntary or good reason termination after CIC(1) Anthony S. Cleberg • Retirement • Death or disability • Involuntary termination • CIC • Involuntary or good reason termination after CIC(1) Linden R. Evans • Retirement • Death or disability • Involuntary termination • CIC • Involuntary or good reason termination after CIC(1) Thomas M. Ohlmacher • Retirement • Death or disability • Involuntary termination • CIC • Involuntary or good reason termination after CIC(1) Steven J. Helmers • Retirement • Death or disability • Involuntary termination • CIC • Involuntary or good reason termination after CIC(1) Payments Made Upon Retirement: In the event of retirement of a Named Executive Officer, in addition to the items identified above, he will also receive the benefit of the following: 4 proxy statement. At our www.blackhillscorp.com. BLACK HILLS CORPORATION 23, 2012 . 22, 2012 22, 2012 1. Election of Directors: 01 David R. Emery Vote FOR o Vote WITHHELD o 02 Rebecca B. Roberts all nominees from all nominees 03 Warren L. Robinson (except as marked) 04 John B. Vering 
2011
201225, 201123, 2012April 13, 201125, 201123, 2012 at 9:30 a.m., local time, at the Dahl Arts Center, 713 Seventh Street, Rapid City, South Dakota. The purpose of our annual meeting is to consider and take action on the following:1.Election of four directors in Class II: David R. Emery, Rebecca B. Roberts, Warren L. Robinson and John B. Vering.1. Election of three directors in Class III: Michael H. Madison, Steven R. Mills and Stephen D. Newlin. 2.Ratification of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the year 2011.2. Authorization of an increase in our authorized indebtedness from $2 billion to $4 billion. 3. 3.An4. Adoption of an advisory, non-binding resolution to approve our executive compensation. 5. Any other business that properly comes before the annual meeting. 4.An advisory, non-binding vote on the frequency for which shareholders will have an advisory, non-binding vote on our executive compensation.5.Any other business that properly comes before the annual meeting.thethese important matters to be considered at this year'syear’s meeting. Our common shareholders of record as of April 5, 2011March 13, 2012 can vote at the annual meeting.Sincerely,
ROXANN R. BASHAMVice President—Governance and Corporate Secretary
25, 2011,23, 2012, and at any adjournment of the annual meeting.therein.in the proxy. Any shareholder signing a proxy has the power to revoke the proxy in writing, addressed to our secretary, or in person at the meeting at any time before the proxy is exercised.$7,500$8,000, plus out-of-pocket expenses. Also, we will, upon request, reimburse brokers or other persons holding stock in their names or in the names of their nominees for reasonable expenses in forwarding proxies and proxy materials to the beneficial owners of stock.April 13, 2011.March 22, 2012. Our 20102011 annual report to shareholders is being mailed to shareholders with this proxy statement.April 5, 2011, will beMarch 13, 2012 are entitled to vote at the meeting. Our outstanding voting stock as of suchthe record date consisted of 39,408,22944,083,768 shares of our common stock.fourthree votes, one each for the election of fourthree directors, and the fourthree votes may be cast for a single person or may be distributed among two or three or four persons.Page Commonly Asked Questions and Answers About the Annual Meeting Process 1—1 - Election of Directors2—2 - Authorization of Increase in IndebtednessProposal 3 - Ratification of Appointment of Independent Registered Public Accounting Firm 20102010201020102010Consulting Agreement483—4 - Advisory Vote on Our Executive CompensationProposal 4—Advisory Vote on the Frequency of the Advisory Vote on Our Executive Compensation4920122013 Annual MeetingCorporation.25, 201123, 2012 at the Dahl Arts Center, 713 Seventh Street, Rapid City, South Dakota.•fourthree directors in Class II: DavidIII: Michael H. Madison, Steven R. Emery, Rebecca B. Roberts, Warren L. RobinsonMills and John B. Vering.•2011.
2012•An; and•An advisory, non-binding vote on the frequency for which shareholders will have an advisory, non-binding vote on our executive compensation.April 5, 2011,March 13, 2012, can vote at our annual meeting. Each share of our common stock getshas one vote.vote for Items 2, 3 and 4. Cumulative voting is permitted in the election of directors. Each share is entitled to fourthree votes for the election of directors, one each for the election of fourthree directors, and the fourthree votes may be cast for a single person or may be distributed among two or three or four persons.•••directors.director. You can also specify whether you approve, disapprove or abstain from the other proposals.••and 3 and the option ofOne Year on Item 4.PROXY 1—1 – Election of Directors.The affirmative vote of a plurality of the votes cast at the meeting is required for the election of directors. This means that the three nominees with the largest number of votes "For"“For” will be elected as directors, up to the maximum number of directors to be chosen at the election.directors. A properly executed proxy marked "Withhold authority"“Withhold authority” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether therea quorum is a quorum.present.2—2 – Authorization of an Increase in our Authorized Indebtedness. The increase in our authorized indebtedness from $2 billion to $4 billion will be approved if the votes cast “For” exceed the votes cast “Against.” Abstentions and broker non-votes will have no effect on this vote.the year 20112012 will be ratified if the votes cast "For"“For” exceed the votes cast "Against."“Against.” Abstentions will have no effect on such vote.3—4 – Adoption of an Advisory Vote onNon-Binding Resolution to Approve Executive Compensation. The advisory vote onresolution to approve executive compensation ("(“say on pay"pay”) is non-binding. However, our Board of Directors will consider shareholders to have approved our executive compensation if the number of votes cast "For"“For” the proposal exceeds the number of votes cast "Against"“Against” the proposal. Abstentions and broker non-votes will have no effect on such vote.Item 4—Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation. The advisory vote on the frequency of the advisory vote on executive compensation ("say when on pay") is non-binding. However, our Board of Directors will consider the frequency receiving the greatest number of votes (every one, two or three years) as the frequency recommended by shareholders. Abstentions and broker non-votes will have no effect on such vote.broker'sbroker’s name? (such as the election of directors and matters related to executive compensation, including "say on pay" and "say when on pay"), when the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on that matter and a "broker non-vote"“broker non-vote” occurs.This means that brokers may not vote your shares on the election of directors, the increase in our authorized indebtedness and the "say“say on pay" and "say when on pay"pay” advisory votesvote if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted."say“say on pay" and "say when on pay"pay” advisory votes.vote. Therefore, we urge you to instruct your broker in writing to vote shares held in street name.2 PROXYelect to cumulate your vote. Cumulative voting will allowallows you to allocate among the director nominees, as you see fit, the total number of votes equal to the number of director positions to be filled multiplied by the number of shares you hold. For example, if you own 100 shares of stock, and there are fourthree directors to be elected at the annual meeting, you could allocate 400 "For"300 “For” votes (four(three times 100) among as few or as many of the fourthree nominees to be voted on at the annual meeting as you choose.'s’s fee for these services is anticipated to be $7,500,$8,000, plus out-of-pocket expenses. We can ask for proxies through the mail or by telephone, fax, or in person. We can use our directors, officers and employees to ask for proxies. These people do not receive additional compensation for these services. We will reimburse brokerage housesbrokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of our common stock.President—President – Governance and Corporate Secretary, at (605) 721-1700.20122013 due?year'syear’s annual meeting in writing to our Corporate Secretary at our executive offices at 625 Ninth Street, P.O. Box 1400, Rapid City, South Dakota 57709,57701, on or prior to December 15, 2011.20112012 annual meeting is scheduled forPROXY 325, 2011.23, 2012. Ninety days prior to the first anniversary of this date will be February 25, 2012,22, 2013, and 120 days prior to the first anniversary of this date will be January 26, 2012.fourthree directors will be elected to Class IIIII of the Board of Directors to hold office for a term of three years until our annual meeting of shareholders in 2014,2015, and until their respective successors shall be duly elected and qualified in accordance with our Bylaws.Company's Bylaws. Threeannual meeting are Michael H. Madison, Steven R. Mills and Stephen D. Newlin. Two nominees for directorsdirector, Messrs. Mills and Newlin, are presently members of our Board of Directors. Mr. Mills was appointed to the Board of Directors in October 2011 and is a nominee for election for the first time. Mr. Madison is not currently a member our Board of Directors and one is not. Ms. Roberts is standing for election for the first time in connection with this proxy statementtime. Both Messrs. Mills and wasMadison were identified by a third party search firm.firms. The proxy attorneysproxies will vote your stock for the election of the fourthree nominees for directors,director, unless otherwise instructed. If, at the time of the meeting, any of such nominees shall beare unable to serve in the capacity for which they are nominated or for good cause will not serve, an eventevents which the Board of Directors does not anticipate, it is the intention of the persons designated as proxy attorneysproxies to vote, atin their discretion, for such nominees as the Governance Committee may recommend and the Board of Directors may propose to replace those who are unable to serve. The affirmative vote of a plurality of the votes cast at the meeting is required for the election of the nominees to the Board of Directors.20112012 Annual Meeting, Kay S. JorgensenDavid C. Ebertz and John R. Howard will complete hertheir service as a membermembers of the Black Hills Corporation Board of Directors. Following her initial election in 1992, Ms. JorgensenMessrs. Ebertz and Howard have served as our directors since 1998 and 1977, respectively. Through their directorships, they have provided leadership and counsel to the Board and management throughoutover an extended period of growth and transformation for the Company. She served as the Board's Presiding Director from May 2006 to May 2010.us. The Board of Directors extends its gratitude to Ms. JorgensenMessrs. Ebertz and Howard for hertheir distinguished service and contributioncontributions to the success of Black Hills Corporation.individual'sindividual’s experience, qualifications, attributes or skills that have led to the conclusion that each individual should serve as a director in light of our current business and structure, is furnished with respect to each nominee and each of the continuing members of the Board of Directors.II—III – Nominees for Election Until 20142015 Annual MeetingDavid R. Emery,Michael H. Madison, 48, has been a director of the Company since 2004. Chairman, President and Chief Executive Officer of Black Hills Corporation, since 2005. Formerly held various positions with Black Hills Corporation, including President and Chief Executive Officer, President and Chief Operating Officer—Retail Business Segment and Vice President—Fuel Resources. Mr. Emery has 21 years of experience with Black Hills Corporation. Prior to joining the Company, he served as a petroleum engineer for a large independent oil and gas company. Mr. Emery is the only employee of the Company currently on our Board. With over 20 years of experience at our Company, he has a deep knowledge and understanding of each of our business units and related industries. An enrolled member of the Cheyenne River Sioux Tribe, supports our Company's interest in promoting diverse perspectives. He has demonstrated leadership abilities serving as our Chairman, President and Chief Executive Officer since 2005. His strategic capabilities, knowledge and industry expertise provide critical leadership to the Board.4 PROXYRebecca B. Roberts, 58,63, is standing for election as a director for the first time.Chevron Pipe Line Company,Cleco Corporation, a pipelinepublic utility holding company, transporting crude oil, refined petroleum products, liquefied petroleum gas, natural gasfrom 2005 to 2011, and chemicals within the United States, from 2006 to February 2011. Ms. Roberts will retire from Chevron effective May 1, 2011. President and Chief Operating Officer of Chevron GlobalCleco Power, GenerationLLC, from 2003 to 2006. Previously a Director of Dynegy, Inc. serving as Chevron's representative2005. He was state president, Louisiana-Arkansas with American Electric Power from March 20062000 to April 2007. Ms. Roberts2003.37more than 40 years of experience in the energy industry. Her industry experience includes managing pipelines in North America and global pipeline projects; managing a portfoliovarious positions of power plants in the United States, Asia and the Middle East; and work as aincreasing responsibility including President, Director, Vice President chemist, scientistof Operations and trader inEngineering, Vice President of Engineering and Production and Vice President of Corporate Services. His knowledge of all aspects of the oilelectric utility business, combined with his position as President and gas sectors. Her diversified energy industry experience and prior service onChief Executive Officer of a public company provide an in-depth business and strategic acumen and diversity that strengthensmake him a valuable member of our Board's collective qualifications, skills and experiences.Warren L. Robinson,Steven R. Mills 61,, 56, has been a director of the Company since 2007.October 2011.TreasurerPerformance and Growth of Archer Daniels Midland Company, a processor, transporter, buyer and marketer of agricultural products from 2010 to February 2012, Executive Vice President and Chief Financial Officer of MDU Resources Group, Inc., a diversified energyfrom 2008 to 2010, and resources company,Senior Vice President Strategic Planning from 19922006 to January 2006. Director of TMI Systems Design Corporation, a private manufacturer of laminate casework, since 2006.RobinsonMills has 29more than 34 years of experience in the utility industry, 18fields of those years with MDU Resources Group.accounting, corporate finance, strategic planning, and mergers and acquisitions. His industry experience at MDU included regulated utilitybackground in finance and operations, and oil and gas exploration and production, two critical business segments for our Company. Mr. Robinson's service as a chief executive for accounting and finance activities relating to our industries provides the necessary financial reporting expertise to serve as Chairman ofon our Audit Committee. His experience as an executiveCommittee and provides financial leader at a publicly traded energy company providesand strategic acumen to strengthen our Board with current knowledge and understanding of the regulated business model, and unique challenges of the geographic and regulatory environment in which we operate.John B. Vering, 61, has been a director of the Company since 2005. Interim President and General Manager of Black Hills Exploration and Production, Inc., our oil and gas subsidiary, since May 2010. Managing Director of Lone Mountain Investments, Inc., oil and gas investments, since 2002. Partner in Vering Feed Yards LLC, a privately owned agricultural company, since March 2010. Previously held several executive positions in the oil and gas industry. Director of Broad Oak Energy, Inc., a privately held oil and gas exploration and production company, since 2006. Mr. Vering has over 30 years of experience, including executive leadership, in the oil and gas industry. He served for 23 years with Union Pacific Resources Company in several positions, including Vice President of Canadian Operations. He has direct operating experience in oil and gas transportation, marketing, and exploration and production, important business segments for our Company. His knowledge and understanding of the trans-national oil and gas business, and his executive leadership experience strengthens our Board'sBoard’s collective qualifications, skills and experiences. He is currently serving as Interim President and General Manager of our oil and gas subsidiary, pursuant to a consulting agreement, leading a strategic review of our oil and gas assets.Class III—Directors with Terms Expiring at 2012 Annual MeetingDavid C. Ebertz, 65, has been a director of the Company since 1998. President, Dave Ebertz Risk Management Consulting, a firm specializing in insurance and risk management services for schools and public entities, since 2000. Previous experience in the insurance industry. Mr. Ebertz resides in the Gillette, Wyoming area, the location of a substantial aggregation of our power generation assets and our coal mine. His service on various local and community boards providesPROXY 5
experience.insight into the political, business and regulatory concerns of Wyoming and the Northern Powder River Basin in particular. Mr. Ebertz' experience in insurance and risk management strengthens our Board's collective qualifications, skills and experiences relating to oversight of enterprise risk.John R. Howard, 70, has been a director of the Company since 1977. Retired. Former President, Industrial Products, Inc., an industrial parts distributor, providing equipment and supplies to the mining and manufacturing industries, from 1992 to 2003 and Special Projects Manager for Linweld, Inc. in Lincoln, Nebraska. Mr. Howard is our longest serving board member, and currently is serving his last term as a director pursuant to the mandatory retirement age established in our Bylaws. His extensive experience with our Company included oversight of different management teams throughout a period of substantial growth and change in our industries. Mr. Howard's knowledge of our Company and industries strengthens our Board's collective qualifications, skills and experiences, particularly relating to corporate governance and strategic planning.58,59, has been a director of the Company since 2004.since 2007.Newlin'sNewlin’s experience as an active chairman and chief executive officer of a public company and experience on other public company boards, provides an in-depth business, financial and strategic acumen that strengthens our Board'sBoard’s collective qualifications, skills and experience and enables him to be an effective Governance Committee Chairman.I—I – Directors with Terms Expiring at 2013 Annual Meeting65,66, has been a director of the Company since 2004.aanother regulated utility. His past experience lends special expertise relating to acquisitions, divestitures and finance. Mr. Eugster provides in-depth business, financial and strategic acumen that strengthens our Board'sBoard’s collective qualifications, skills and experience and enables him to be an effective Compensation Committee Chairman. 61,, 62, has been a director of the Company since 2007.6 PROXY the chief executive officer of a publicly-traded company, and positions in finance and accounting. Currently Director of Insteel Industries, Inc. since 1998 and Texas Industries, Inc. since 2009.Pechota'sPechota’s background in finance and accounting provides the necessary expertise to serve on our Audit Committee. AnAs an enrolled member of the Rosebud Sioux Tribe, Mr. Pechota supports our Company'sCompany’s interest in promoting diverse perspectives, as well as expertise relating to our business interests on tribal lands. In addition, his experience as an executive leader at several companies, his public company board experience, and his knowledge of mining and extracting minerals and the associated environmental issues, strengthens our Board'sBoard’s collective qualifications, skills and experiences.63,64, has been a director of the Company since 1997.sincefrom January 2011 to August 2011 and served as President from 1995 to January 2011.Company'sCompany’s activities concerning technology, engineering and environmental matters. This expertise, in addition to his experience as an executive leader, provides valuable knowledge to our Board and strengthens its collective qualifications, skills and experiences relating to technical aspects of our Company operations and contract relationships."Corporate“Corporate Governance Guidelines of the Board of Directors"Directors” which setguide the tone for operation of our Board and assist the Board in fulfilling its obligations to shareholders and other constituencies. The guidelines lay the foundation for the Board'sBoard’s responsibilities, operations, leadership, organization and committee matters. The Governance Committee reviews the guidelines annually, and the guidelines may be amended at any time, upon recommendation by the Governance Committee and approval of the Board. These guidelines can be found in the “Governance” section of our website ("Governance"“Governance” section of our website (www.blackhillscorp.com/corpgov.htm)(www.blackhillscorp.com/corpgov.htm). Based on these standards, the Governance Committee determined that each of the following non-employee directors and director nominee is independent and has no relationship with the Company,us, except as a director and shareholder of the Company:shareholder:David C. Ebertz Jack W. Eugster John R. Howard Kay S. JorgensenMichael H. MadisonSteven R. Mills Stephen D. Newlin Gary L. Pechota Rebecca B. Roberts Warren L. Robinson Thomas J. Zeller (the "CEO"(“CEO”). Mr. Vering is not independent because of his rolehe served as Interim President and General Manager of our oil and gas companysubsidiary during a portion of 2010 and our consulting contract with Lone Mountain Investments Inc., of which Mr. Vering is Managing Director.Structure.Structure. As noted above, our Board is currently comprised of teneleven directors, eightnine of whichwhom are independent. Mr. Emery has served as our Chairman of the Board and CEO since 2005, and has been a member of our Board since 2004. Mr. Emery provides strategic, operational, and technical expertise and context for the matters considered by our Board. After considering alternative board leadership structures, our Board chose to retain the ability to balance an independent Board structure with the flexibility to appoint as Chairman a CEO-Director with knowledge of and experience in the operations of our Company. At this time, our Board believes that having a single person serve as Chairman and CEO provides unified and responsible leadership for our Company. been, and continues to value a high degree of Board independence. As a result, our corporate governance structure and practices promote a strong, independent Board, and include several independent oversight mechanisms, including onlymechanisms. Only independent directors servingserve on our Audit, Compensation and Governance Committees and appointing awe have appointed an independent Presiding Director. Our Board believes these practices ensure that experienced and independent directors will continue to effectively oversee management and critical issues related to financial and operating plans, long-range strategic issues, enterprise risk and corporate integrity. All of our Board Committeescommittees may seek legal, financial or other expert advice from a source independent of management.Board'sBoard’s Governance Guidelines, are to chair executive sessions of the independent directors and communicate the Board'sBoard’s annual evaluation of the CEO. The Presiding Director, together with the independent directors, establishes the agenda for executive sessions, which are held at each regular Board meeting. The Presiding Director serves as a liaison between the independent members of8 PROXYOversight.Oversight. Our Board oversees an enterprise approach to risk management that supports theour operational and strategic objectives of the Company.objectives. The Corporate Governance Guidelines of our Board of Directors provide that the Board will review major risks facing our Company and the options for risk mitigation presented by management. Our Board delegates oversight of certain risk considerations to its committees within each of their respective areas of responsibility; however, the full Board monitors risk relating to strategic planning and execution, as well as executive succession. Financial risk oversight falls within the purview of our Audit Committee. Our Compensation Committee oversees compensation and benefit plan risks. Each committee reports to the full Board.the Company'sour key enterprise risk management issues with management at each quarterly Board meeting in conjunction with the presentation of quarterly financial results. In so doing, our Board seeks to ensure appropriate risk mitigation strategies are implemented by management on an ongoing basis. Operational and strategic plan presentations by management to our Board include consideration of the challenges and risks to our business. Our Board and management actively engage in discussions of these topics and utilize outside consultants as needed. Our Board oversees developmentthe assessment of the Company'sour strategic plan risks as part of its annualour strategic planning meeting.process. In addition, our Board receives environmental, safety, legal and compliance reports at least annually.management'smanagement’s strategy and performance relative to theour significant financial risks of the Company.risks. In consultation with management, the independent auditors and the internal auditors, the Audit Committee discusses the Company'sour risk assessment, risk management and credit policies, and reviews significant financial risk exposures along with steps management has taken to monitor, mitigate and report such exposures. At least twice a year, our Chief Risk Officer provides a Risk and Credit Report to the Audit Committee. The Company adopted Risk Policies and Procedures for our energy marketing operations that address governance, control infrastructure, authorized commodities and trading instruments, prohibited activities, employee conduct and other concerns. The Company alsoWe adopted a Credit Policy that establishes guidelines, controls and limits to manage and mitigate credit risk within risk tolerances established by the Committee. The Audit Committee reviews these policies as the Internal Audit Department regularly reports audit results concerning compliance with these policies to them.theour long-term success of the Company.success. The target compensation for our senior officers is heavily weighted in favor of long-term incentives, aligning performance incentives with long-term results for our shareholders. Our Compensation Committee also sets minimum performance thresholds and maximum payouts in the incentive programs, and maintains the discretion to reduce awards if excessive risk is taken. Stock ownership guidelines established for all of our officers requireexpect our executives to hold 100 percent of all shares awarded to them until the established stock ownership guidelines are achieved. Our Compensation Committee also instituted "claw-back"“claw-back” provisions in our incentive plans, which may require an executive to return incentives received, if the Compensation Committee determines, in its discretion, that the executive engaged in specified misconduct or wrongdoing.PROXY 9management. Reportingmanagement and operates under an enterprise risk management (ERM) program that addresses strategic, operational and financial risks. The ERM program includes practices to identify risks, assesses the impact and probability of occurrence, and develops action plans to prevent the occurrence or mitigate the impact of the risk. The ERM program includes regular reporting to our senior management team our Treasury,and includes monitoring and testing by Risk Management, Compliance and Internal Audit groups providegroups. The overall ERM program is reviewed with the primary monitoring and testing services in accordance with company-wide policies and procedures, and oversee the day-to-day risk management strategy for our ongoing businesses. Their oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels... The Governance Committee utilizesuses a variety of methods for identifying and evaluating nominees for director. The Governance Committee regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event vacancies are anticipated, or otherwise arise, the Governance Committee considers various potential candidates for director. Board candidates are considered based upon various criteria, including diverse business, administrative and professional skills or experiences; an understanding of relevant industries, technologies and markets; financial literacy; independence status; the ability and willingness to contribute time and special competence to Board activities; personal integrity and independent judgment; and a commitment to enhancing shareholder value. The Governance Committee considers these and other factors as it deems appropriate, given the needs of the Board and the Company.us. Our goal is a balanced and diverse Board, with members whose skills, background and experience are complementary and, together, cover the spectrum of areas that impact our business. The Governance Committee considers candidates for Board membership suggested by a variety of sources, including current or past Board members, the use of third-party executive search firms, members of management and shareholders. There are no differences in the manner by which the Committee evaluates director candidates recommended by shareholders from those recommended by other sources.P.O. Box 1400, 625 Ninth Street, Rapid City, South Dakota, 57709,57701, not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. The notice must set forth at a minimum the information set forth in Article I, Section 9 of our Bylaws, including the shareholder'sshareholder’s identity and status, contingent ownership interests, description of any agreement made with others acting in concert with respect to the nomination, specific information about the nominee and supply certain representations by the nominee to the Company...Shareholders and others interested in communicating directly with the Presiding Director, with the independent directors as a group, or the Board of Directors may do so in writing to the Presiding Director, Black Hills Corporation, P.O. Box 1400, 625 Ninth Street, Rapid City, South Dakota, 57709.57701... The charters of the Audit, Compensation and Governance committees, as well as the Board'sBoard’s Corporate Governance Guidelines, Policy for Director Independence, Code of Business Conduct and the Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, and certain other persons performing similar functions can be found in the "Governance"“Governance” section of our website (www.blackhillscorp.com/corpgov.htm)www.blackhillscorp.com/corp.gov.htm. We intend to disclose any amendments to, or waivers of the Code of Ethics on our website. Please note that none of the information contained on our website is incorporated by reference in this proxy statement.the Companyus and our shareholders. Accordingly, as a10 PROXYthe Companyus and our shareholders, including but not limited to situations where we may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when we provide products or services to related parties on an arm'sarm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally. Therefore, our Board of Directors has adopted a policy for the review of related party transactions. This policy requires directors and officers to promptly report to our Vice President—President – Governance all proposed or existing transactions in which the Company and they, or persons related to them, are parties or participants. Our Vice President—President – Governance presents to our Governance Committee those transactions that may require disclosure pursuant to Item 404 of Regulation S-K (typically, those transactions that exceed $120,000). Our Governance Committee reviews the material facts presented and either approves or disapproves entry into the transaction. In reviewing the transaction, the Governance Committee considers the following factors, among other factors it deems appropriate: (i) whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances; (ii) the extent of the related party'sparty’s interest in the transaction; and (iii) the impact on a director'sdirector’s independence in the event the related party is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer.2010,2011, all persons subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, filed the required reports on a timely basis, except for two Form 4s reporting two transactions for Mr. Ohlmacher relating to market sales pursuant to a 10b5-1 Plan.basis.management of the Company.our management. Our Board of Directors held sixeight meetings during 2010. Directors' attendance at all Board and Committee meetings averaged 97 percent. During 2010, every director attended at least 75 percent of the combined total of Board meetings and Committee meetings on which the director served.2011. Each regularly scheduled meeting of the Board includes an executive session of only independent directors. We encourage our directors to attend the annual shareholders'shareholders’ meeting. All 10During 2011, every director attended at least 75 percent of the combined total of Board meetings and Committee meetings on which the director served and all directors were in attendance atattended the 20102011 annual meeting of shareholders.PROXY 11directorsBoard upon recommendation of the Governance Committee. The table below shows current membership for each of the Board committees.Audit Committee Compensation Committee Governance Committee John R. Howard David C. EbertzRebecca B. Roberts David C. Ebertz Gary L. PechotaSteven R. MillsJack W. Eugster*David C. Ebertz Jack W. Eugster WarrenGary L. Robinson*PechotaKay S. JorgensenKay S. JorgensenStephen D. NewlinJack W. Eugster* Stephen D. Newlin* Warren L. Robinson* Stephen D. Newlin Gary L. Pechota __________________ Thomas J. Zeller Gary L. Pechota* Committee Chairperson*Committee Chairperson.. The Audit Committee held seven meetings in 2010.2011. The Audit Committee'sCommittee’s responsibilities, discussed in detail in its charter include, among other duties, the responsibility to:•for oversight ofto our shareholders relating to the quality and integrity of our accounting, auditing and financial reporting practices;•monitor•the Company;••••••the Company'sour process for monitoring compliance with our Code of Conduct;Conduct and•Messrs. Howard, Pechota and Robinson eachall of the members of the Audit Committee have the requisite attributes of an "audit“audit committee financial expert"expert” as provided in regulations promulgated by the Securities and Exchange Commission, and that such attributes were acquired through relevant education and/or experience... The Compensation Committee held sixseven meetings in 2010.2011. The Compensation Committee'sCommittee’s responsibilities, discussed in detail in its charter include, among other duties, the responsibility to:•Director'sDirectors’ responsibilities related to executive and director compensation philosophy, policies and programs;••12 PROXY•terms. The Committeeterms and may delegate any of its responsibilities to subcommittees as the Committee may deem appropriate in its sole discretion. The Committee engaged Towers Watson, an independent consulting firm, to conduct an annual review of its 20102011 total compensation program for executive officers and directors. In addition, Towers Watson was engaged by management to provide certainExpenses for other services, including an energy marketing compensation review, services related to union negotiations and grievances and an actuarial analysis of insurance claims. Management discussed with the Committee the other work to be performed by Towers Watson. Total aggregate fees forconsulting services provided to us in 2010 by Towers Watson, were $375,000, comprised of $237,000 for servicesthat are not related to executive compensation, are monitored to ensure that executive compensation consultant independence is maintained. Towers Watson did not provide us with services in excess of $120,000 that were in addition to the services provided in connection with its advice and recommendations on the amount or form of executive and director compensation and $138,000 for other services.CEO'sCEO’s performance in light of established goals and objectives, with input from the other independent directors. Based upon the Committee'sCommittee’s evaluation and recommendation, the independent directors of the Board set the CEO'sCEO’s annual compensation, including salary, bonus, incentive and equity compensation.management'smanagement’s evaluations of our other officers. Senior officers assess performance of all officers reporting to them. Based upon these performance reviews, market analysis conducted by the compensation consultant and discussions with our ChiefSr. Vice President, Human Resources, Officer, the CEO recommends the compensation of the officers to the Committee. The Committee may exercise its discretion in modifying any of the recommended compensation and award levels in its review and approval process.Committee'sCommittee’s processes and procedures for considering and determining executive compensation, including the role of our CEO and consultants in determining or recommending the amount or form of executive compensation, is included in the Compensation Discussion and Analysis.2010,2011, the Compensation Committee retained Towers Watson to provide market information on non-employee director compensation, including annual board and committee retainers, board and committee meeting fees, committee chairperson fees, number of Board meetings and stock based compensation... The Governance Committee held three meetings in 2010.2011. The Governance Committee'sCommittee’s responsibilities, discussed in detail in its charter include, among other duties, the responsibility to:••Contents•••••••2010,2011, our non-employee director compensation was as follows:••$50,000$60,000 per year, paid on a quarterly basis;••$1,250$1,500 for each boardBoard and committee meeting attended, provided such committee meetings are substantive in nature and content.•Director—Director – an annual fee of $15,000;•Chairperson—Chairperson – an annual fee of $10,000; and•Compensation and Governance Committee Chairpersons—annual fees of $6,000. Effective January 1, 2011, our non-employee director compensation was increased to the following:•an annual cash retainer of $36,000, paid on a monthly basis;•common stock equivalents equal to $60,000 per year, paid on a quarterly basis;•dividend equivalents on the common stock equivalents equal to the same dividend rate our shareholders receive; and•a meeting fee of $1,500 for each board and committee meeting attended, provided such committee meetings are substantive in nature and content. In addition, our Presiding Director and Committee Chairpersons receive the following additional compensation:•Presiding Director—an annual fee of $15,000;•Audit Committee Chairperson—an annual fee of $10,000;•Chairperson—Chairperson – an annual fee of $8,000; and•Chairperson—Chairperson – an annual fee of $6,000.14 PROXY Total Compensation for 20102011 and Common Stock Equivalents Outstanding as of December 31, 2010(1)2011(1) Fees
Earned or
Paid
in Cash Stock
Awards(3) All Other
Compensation Total Number of
Common Stock
Equivalents
Outstanding at
December 31, 2010(4) Name Fees Earned or Paid in Cash All Other Compensation Total David C. Ebertz $ 59,750 $ 50,000 — $ 109,750 12,053 $ 70,500 $ 60,000 - $ 130,500 14,572 Jack W. Eugster $ 65,750 $ 50,000 — $ 115,750 9,190 $ 80,000 $ 60,000 - $ 140,000 11,573 John R. Howard $ 62,250 $ 50,000 — $ 112,250 18,867 $ 70,500 $ 60,000 - $ 130,500 21,710 Kay S. Jorgensen $ 65,375 $ 50,000 — $ 115,375 14,139 $ 29,000 $ 25,000 - $ 54,000 - $ 18,000 $ 10,000 - $ 28,000 154 Stephen D. Newlin $ 64,500 $ 50,000 — $ 114,500 9,410 $ 81,000 $ 60,000 - $ 141,000 11,803 Gary L. Pechota $ 62,250 $ 50,000 — $ 112,250 6,550 $ 73,500 $ 60,000 - $ 133,500 8,808 $ 46,500 $ 35,000 - $ 81,500 965 Warren L. Robinson $ 73,500 $ 50,000 — $ 123,500 6,726 $ 80,500 $ 60,000 - $ 140,500 8,992 John B. Vering(5) $ 25,000 $ 50,000 $ 382,525 $ 457,525 8,550 - $ 60,000 $ 578,968 $ 638,968 10,903 Thomas J. Zeller $ 66,625 $ 50,000 — $ 116,625 12,465 $ 87,000 $ 60,000 - $ 147,000 15,003 ________________ (1) (2) Mr. Emery, our CEO, is not included in this table because he is our employee and thus receives no compensation for his services as a director. Mr. Emery’s compensation received as an employee is shown in the Summary Compensation Table for our Named Executive Officers. (3) Each non-employee director received a quarterly award of common stock equivalents with a grant date fair value of $15,000 per quarter or $60,000 a year. (4) The common stock equivalents are fully vested in that they are not subject to forfeiture; however, the shares are not issued until after the director ends his or her service on the Board. The common stock equivalents are payable in stock or cash or can be deferred further at the election of the director. (5) Ms. Jorgensen’s term as a member of our Board of Directors concluded May 25, 2011, and consequently her fees earned and stock award fair value reflect a partial year of service. (6) Ms. Roberts and Mr. Mills became members of our Board of Directors effective May 25, 2011 and October 26, 2011, respectively, consequently their fees earned and stock award fair values reflect a partial year of service. (7) Mr. Vering served as Interim President and General Manager of our oil and gas subsidiary from May 2010 until December 2011, leading a strategic review of our oil and gas assets. In exchange for his services, pursuant to a consulting agreement dated May 3, 2010, he received $42,000 per month and temporary living expenses. He did not receive cash Board compensation during the term of the agreement. In 2011, he received $504,000 for his services as Interim President and General Manager and was provided temporary living expenses totaling $74,968. Mr. Vering’s role as Interim President and General Manager ended on December 13, 2011, when John Benton was hired as Vice President and General Manager of our oil and gas subsidiary. He also received a project completion bonus in 2012 in the amount of $150,000, which is not included in his 2011 Other Compensation because the Board of Directors did not authorize and approve the bonus until January 26, 2012. The consulting agreement, as amended, expired January 31, 2012. (1)Our directors did not receive any option awards, non-equity incentive plan compensation, pension benefits or perquisites in 2010.(2)Mr. Emery, our CEO, is not included in this table as he is an employee of the Company and thus receives no compensation for his services as a director. Mr. Emery's compensation received as an employee is shown in the Summary Compensation Table for our Named Executive Officers.(3)Each non-employee director received a quarterly award of common stock equivalents with a grant date fair value of $12,500 a quarter or $50,000 a year.(4)The common stock equivalents are fully vested in that they are not subject to forfeiture; however, the shares are not issued until after the director ends his or her service on the Board. The common stock equivalents are payable in stock or cash or can be deferred further at the election of the director.(5)Mr. Vering has been serving as Interim President and General Manager of our oil and gas subsidiary since May 2010, leading a strategic review of our oil and gas assets. In exchange for his services, pursuant to a consulting agreement dated May 3, 2010, he receives $42,000 per month and temporary living expenses. He may also receive a project completion bonus to be determined by the Board of Directors, not to exceed $150,000. He does not receive cash Board compensation during the term of the agreement. In 2010, he received $336,000 for his services as Interim President and General Manager and was provided temporary living expenses totaling $46,525. The consulting agreement, unless extended, expires July 31, 2011. Membersareis required to apply at least 50 percent of his or her annual cash retainer toward the purchase of shares of common stock until the director has accumulated at least 7,500 shares of common stock or common stock equivalents. All of our directors have currently met their stock ownership guidelines.PROXY 15March 31, 2011February 29, 2012 for each director, each executive officer named in the Summary Compensation Table, all of our directors and executive officers as a group, and each person or entity known by us to beneficially own more than five percent of our outstanding shares of common stock. Beneficial ownership includes shares a director or executive officer has the power to vote or transfer, and stock options that are exercisable currently or within 60 days of March 31, 2011.
Beneficial Owner Shares of
Common
Stock
Beneficially
Owned(1) Options
Exercisable
Within
60 Days Directors
Common
Stock
Equivalents(2) Total Percentage(3) Directors and Named Executive Officers
36,002
36,002 Anthony S. Cleberg 44,656 44,656 * 6,596 12,661 19,257 * 6,596 15,198 21,794 * 111,954 30,832 142,786 * 121,411 25,882 147,293 * 13,000 9,764 22,764 * 17,000 12,165 29,165 * 46,217 10,000 56,217 * 60,735 60,735 * 41,045 19,110 60,155 * 43,407 10,110 53,517 * 16,864 19,555 36,419 * 16,864 22,416 39,280 * 7,795 14,771 22,566 * Michael H. Madison - - - * Steven R. Mills 384 618 1,002 * Robert A. Myers 25,215 25,215 * 2,634 9,986 12,620 * 5,042 12,398 17,440 * 47,449 2,500 49,949 * 6,104 7,093 13,197 * 7,123 9,180 16,303 * — — — * 3,849 1,437 5,286 * 4,593 7,271 11,864 * 6,763 9,117 15,880 * 6,581 13,077 19,658 * 394,525 62,442 103,294 560,261 1.4% Warren L. Robinson 6,098 9,555 15,653 * John B. Vering 10,799 11,487 22,286 * Thomas J. Zeller 7,501 15,634 23,135 * All directors and executive officers as a group (18 persons) 400,589 35,992 110,088 546,669 * Represents less than one percent of the common stock outstanding. (1) Beneficial ownership means the sole or shared power to vote, or to direct the voting of, a security or investment power with respect to a security. (2) Includes restricted stock held by the following executive officers for which they have voting power but not investment power and stock underlying phantom stock units the executive officers have the right to acquire within 60 days as to which they have no current voting or investment power: Mr. Cleberg – 11,459 shares; Mr. Emery – 25,276 shares; Mr. Evans – 12,520 shares; Mr. Helmers – 8,474 shares; Mr. Myers – 6,448 shares and 2,907 phantom stock units; and all directors and executive officers as a group – 73,663 shares and 2,907 phantom stock units. (3) Represents common stock allocated to the directors’ accounts in the directors’ stock based compensation plan, of which there are no voting rights. *Represents less than one percent of the common stock outstanding.(1)Includes restricted stock held by the following executive officers for which they have voting power but not investment power and stock underlying restricted stock units the executive officers have the right to acquire within 60 days as to which they have no current voting or investment power: Mr. Cleberg—13,724 shares; Mr. Emery—27,635 shares; Mr. Evans—15,299 shares; Mr. Helmers—10,380 shares; Mr. Ohlmacher—5,614 shares and 33,326 restricted stock units; and all directors and executive officers as a group—92,411 shares and 33,326 restricted stock units.(2)Represents common stock allocated to the directors' accounts in the directors' stock based compensation plan, of which there are no voting rights.(3)Shares of common stock which were not outstanding but could be acquired by a person upon exercise of an option within 60 days of March 31, 2011,(4) Shares of common stock which were not outstanding but could be acquired by a person upon exercise of an option within 60 days of March 1, 2012 are deemed outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by such person. Such shares, however, are not deemed to be outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by any other person. (5) Includes 4,500 shares that are pledged by Mr. Emery as security on a personal bank loan. Five Percent Shareholders 5,809,393 3,999,799 2,373,380 (1) (2) (3) Information is as of December 31, 2009, and is based on a Schedule 13G filed on January 27, 2010. 2012 2013 2014 (in thousands) Electric utilities $ 247,000 $ 371,700 $ 206,300 Gas utilities 46,000 54,700 43,800 Oil and gas 112,200 123,500 126,100 Other 32,000 30,800 29,600 Total $ 437,200 $ 580,700 $ 405,800 computingeffecting such increase, bonds, debentures, notes and other instruments evidencing our indebtedness may be issued from time to time in such form and of such character as is desirable to the percentageBoard of outstanding shares beneficially ownedDirectors as long as the maximum indebtedness authorized by such person. Such shares, however, arethis resolution is not deemedexceeded.outstanding forapproved if the purposevotes cast “For” exceed the votes cast “Against.” Abstentions and broker non-votes will have no effect on this vote.computing Directors of Black Hills Corporation recommends a vote FORpercentage of outstanding shares beneficially owned by any other person.16 PROXY
increase in authorized indebtedness(4)Includes 140 shares owned by Mr. Cleberg's spouse and 3,185 shares owned by the Fern Wagner Revocable Living Trust of which Mr. Cleberg is the Trustee.(5)Includes 82,694 shares owned jointly with Mr. Emery's spouse as to which he shares voting and investment authority and 4,500 shares that are pledged as security on a personal bank loan.(6)Includes 500 shares owned by Mr. Robinson's spouse.(7)Includes 4,000 shares owned jointly with Mr. Vering's spouse as to which he shares voting and investment authority.(8)Includes 225 shares owned jointly with Mr. Zeller's spouse as to which he shares voting and investment authority.
Beneficial Owner Shares of
Common Stock
Beneficially
Owned Percentage
40 East 52nd Street
New York, NY 10022
4,936,242
12.5
%
Ronda Universitat, 31 1-1
Barcelona, Spain 08007
2,373,380
6.0
%
One Lincoln Street
Boston, MA 02111
3,042,230
7.7
%(1)Information is as of December 31, 2010, and is based on a Schedule 13G filed on January 10, 2011.(2)Information is as of December 31, 2009, and is based on a Schedule 13G filed on January 27, 2010.(3)Information is as of December 31, 2010, and is based on a Schedule 13G filed on February 11, 2011.232010.2011. Representatives of Deloitte & Touche LLP will be present at our annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.the year 20112012 and to render their reports. The Board of Directors recommends ratification of the Audit Committee'sCommittee’s appointment of Deloitte & Touche LLP. The appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2012 will be ratified if the votes cast “For” exceed the votes cast “Against.” Abstentions will have no effect on such vote. If shareholder approval for the appointment of Deloitte & Touche LLP is not obtained, the Audit Committee will reconsider the appointment.
Deloitte & Touche LLPthe year 2011PROXY 17201220102011 and 20092010 by our independent registered public accounting firm, Deloitte & Touche LLP.2011 2010 2009(1) $ 2,688,400 $ 3,082,500 $ 2,428,200 $ 2,752,500 148,500 121,700 138,700 148,500 787,100 1,092,100 654,000 787,100 $ 3,624,000 $ 4,296,300 Total Fees $ 3,220,900 $ 3,688,100 (1)The 2009 amounts were adjusted from amounts shown in the 2010 proxy statement to reflect actual costs.(1) "Audit“Audit Fees."” These services include internal control reviews; attest services that are not required by statute or regulation; employee benefit plan audits; due diligence, consultations and audits related to mergers and acquisitions; and consultations concerning financial accounting and reporting standards.Committee'sCommittee’s pre-approval policy whereby the Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accountants. The Audit Committee will generally pre-approve a list of specific services and categories of services, including audit, audit-related, tax and other services, for the upcoming or current fiscal year, subject to a specified cost level. Any service that is not included in the approved list of services must be separately pre-approved by the Audit Committee.18 PROXY2010,2011, the Audit Committee has (1) reviewed and discussed the audited financial statements with management; (2) discussed with Deloitte & Touche LLP, the Company'sour independent registered public accounting firm (the "Auditors"“Auditors”), the matters required to be discussed by the statement on Auditing Standard No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU section 380), as adopted by the Public Accounting Oversight Board in Rule 3200T; and (3) received the written disclosures and letter from the Auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the Auditors'Auditors’ communications with the Audit Committee concerning independence, and has discussed with the Auditors their independence from the Company.us.the Company'sour audited consolidated financial statements be included in theour Annual Report on Form 10-K for the year ended December 31, 20102011 filed with the Securities and Exchange Commission.THE AUDIT COMMITTEEWarren L. Robinson, ChairpersonJohn R. HowardGary L. PechotaPROXY 19Introduction20102011 compensation for our executive officers included in the Summary Compensation Table (our "Named“Named Executive Officers"Officers”). Our Named Executive Officers, based on 20102011 positions and compensation levels, are:••("CFO"(“CFO”);•("COO"(“COO”)-Utilities;•Thomas M. Ohlmacher, COO-Non-regulated Energy; and•Officer. Mr. Ohlmacher announced in 2010 that he will retire from the Company on March 31, 2011."Committee,"“Committee,” for purposes of this Compensation Discussion and Analysis) is composed entirely of independent directors and is responsible for approving and overseeing our executive compensation philosophy, policies and programs.•••••outstanding performance.2010 Accomplishments2010.2011. Accomplishments include, among other things:•Completed110 MW Wygen III coal-fired generation facility near Gillette, Wyoming, three months ahead of schedule and at a lower cost than originally anticipated•Started construction of a$491 million, 380 MW gas-fired generation facility nearin Pueblo, Colorado•Implemented new in record time, on budget and interim rates in five utility jurisdictions, increasing annual revenue by $47.1 million20 PROXY•Essentially completed the unification and integration of systems and processes necessarywith an industry leading safety record;fully integrate the utility properties acquired in mid-2008, creating operating efficienciesrecover costs and a more scalable platformreturn associated with the new Pueblo Generation Complex totaling approximately $28 million in annual revenues, effective January 1, 2012;support future growth•Improvedbe placed into service in 2013 to 2014, including a 29 MW wind project for Colorado Electric with a net utility investment of $27 million; $31 million of transmission projects for Colorado Electric; and a $237 million, 132 MW natural gas-fired generation facility for our Cheyenne Light, Fuel & Power and Black Hills Power utilities;- settling an Equity Forward Agreement by issuing 4,413,519 shares of common stock with net proceeds of approximately $120 million; and - completing $250 million of term loan financings; —completed corporate and energy marketing credit facilities for a combined total of $750 million—sold a 23 percent interest in Wygen III—completed $300 million of debt financings—executed a public offering of common stock pursuant to a Forward Sale Agreement, to be settled in 2011 with net proceeds of approximately $127 million before adjustments•Increased40th41st consecutive year•Achievedyear; and2713 percent20102011 Compensation Decisions•20102011 averaged 8one percent belowabove the median of the market.as well asand stock-based compensation. The total target compensation mix for our Named Executive Officers in 20102011 averaged:•••component—component – base salary, short-term incentive and long-term incentives.incentive. Incentive measures (short- and long-term) should emphasize objective, quantitative operating measures. The performance measures for our incentive compensation plans are as follows:•— – Merit increases for base salary take into account the individual executive'sexecutive’s performance and achievement of goals.goals as well as the executive’s current salary level relative to market. In 2010:
2011—The, the Committee approved base salary increases for our Named Executive Officers excluding Mr. Evans, averaging 46.2 percent. This was the first base salary increase our Named Executive Officers had received in more than two years. Base salaries were not increased in 2009, due to the difficult external economic conditions and uncertainties that existed at the time.—Mr. Evans' base salary was increased 31 percent, reflecting the substantial impact of the acquisition of the Aquila utility properties on his job responsibilities. The acquisition more than doubled our utility assets from $830 million to $2.2 billion, tripled the number of utility employees and increased the number of state jurisdictions of our utility properties from three to seven.PROXY 21•— – The short-term incentive is based on earnings per share targets. ThisThe Committee believes that this performance measure closely aligns the executives'executives’ and shareholders'our shareholders’ interests and fosters teamwork and cooperation.—The 2010 short-term target incentive opportunity for our Named Executive Officers remained the same as the prior year and ranged- 3070 percent to 20080 percent of target. The Committee selected a composite earnings per share goal for the 2010 corporate goal that was weighted 80base salaryon non-energy marketing earnings per share and 20 percent on energy marketing earnings per share. The Committee chose this weighted methodology because it addresses the volatility of our energy marketing segment's earnings, and the potential for this volatility to disproportionately influence bonus outcomes for participants in the Short-Term Incentive Plan, both positively and negatively, and also because many participants are not directly involved in this business segment.On January 26, 2011, the Committee approved a payout of 16050 percent of target under the 2010 Short-Term Incentive Plan, comprisedbase salarya 160 percent payout from non-energy marketing earnings and no payout from energy marketing earnings.•- - Based on the attainment of pre-established performance goals the actual payout can range from 30 percent to 200 percent of target. - - — – The long-term incentive is delivered 50 percent in restricted stock that vests over a three-year service period and 50 percent in performance shares. Entitlement to the performance shares is based on our total shareholder return over a three-year performance period compared to our peer group. This performance measure was chosen because it mirrors the market return of our shareholders and compares our performance to that of our peer group.—Although our total shareholder return for 2010 was 27 percent, several factors significantly impacted our financial performance for the January 1, 2008 to December 31, 2010 performance period, including a dramatic decrease in natural gas prices from mid-2008 levels and the global economic crisis that commenced in late 2008.—Our total shareholder return for the three-year period was negative 20 percent, which ranked at the 15th percentile of our peer group, resulting in no payout for our Named Executive Officers.- Although our total shareholder return for the three-year period was 46 percent, we only ranked at the 34th percentile of our peer group, resulting in no payout for our Named Executive Officers. —Consistent with prior years, the Committee awarded 50 percent of the Named Executive Officers' Long-Term Incentive in restricted stock that ratably vests over three years. We entered into new change in control agreements with our Named Executive Officers in 2010. The new agreements were entered into to reflect the retirement plan changes that were effective January 1, 2010. Excise tax gross-up provisions were also eliminated in the new agreements. The new change in control agreements expire November 15, 2013.- Consistent with prior years, the Committee awarded 50 percent of the Named Executive Officers’ Long-Term Incentive in restricted stock that ratably vests over three years. limited perquisites, and clawback provisions in our short- and long-term incentive award agreements.•••executive'sexecutive’s responsibilities and duties and align with the compensation of executives at companies or business units of comparable size and complexity. The Committee gathers market information for our corporate executives from the utility and energy industry, recognizing the significant impact of our regulated utility operations on overall company strategy and performance.••••20102011 compensation. Towers Watson gathered data from nationally recognized survey providers, as well as specific peer companies through public filings, which included:•Watson's 2009Watson’s 2010 Compensation Data Bank (utility/energy services(utility and general industry);•Watson's 2009Watson’s 2010 Energy Marketing & Trading Survey; and•20and utility industry.2019 peer companies ranged in revenue size from approximately $800$750 million to nearly $5$4.2 billion with the median at $1.675$1.6 billion. These are the same companies the Committee chose for our peer group for our Performance Share Program. The survey data were adjusted for our size using either regression analysis or tabular data from companies with annual revenues between $1 billion and $3 billion.AGL Resources Inc. IDACORP, Inc. NV Energy, Inc. ALLETE Inc. MDU Resources Group, Inc. UIL Holdings Corporation Avista Corp NorthWestern Corporation UniSource Energy Corporation CH Energy Group Inc. Otter Tail Corporation Vectren Corporation Cleco Corporation PNM Resources, Inc. Westar Energy, Inc. DPL Inc. Portland General Electric CompanyWGL Holdings, Inc.Great Plains Energy Incorporated Portland General Electric Company WGL Holdings, Inc. Note:DPL Inc. and Puget Energy waswere originally included in our peer group but waswere removed because itDPL was acquired by another company duringin 2011 and Puget Energy was acquired by another company in 2009. DPL was included in Tower Watson’s 2011 compensation evaluation.)inputs intofactors the Committee's decisions regardingCommittee uses in setting appropriate compensation levels. Other factors include company performance, individual performance andPROXY 23executive'sexecutive’s responsibilities, and discussions with the CEO related to the other officers.officers'officers’ retirement and other benefits.officer'sofficer’s compensation, including salary, short-term incentive, equity and other long-term incentive compensation values granted, and the current and potential value of the executive officer'sofficer’s total Black Hills Corporation equity holdings in the Company.20102011 were as follows: Base
Salary Short-Term
Incentive Long-Term
Incentive 36 % 26 % 38 % 33% 26% 41% 42 % 19 % 39 % 40% 20% 40% 39 % 20 % 41 % 38% 23% 39% 39 % 19 % 42 % 43 % 17 % 40 % 43% 17% 40% Robert A. Myers, Sr. Vice President, Human Resources 48% 19% 33% 20102011 averaged 8one percent belowabove the market median.executive'sexecutive’s performance, the experience level of the officer, the executive'sexecutive’s current position in a market-based salary range, and internal pay relationships. Evaluation of 20102011 base salary adjustments occurred in January 2010.2011. The Committee approved base salary increases for our Named Executive Officers excluding Mr. Evans, averaging 46.2 percent. This was the first base salary increase our Named Executive Officers had received in more than two years. Mr. Evans' base salary was increased 31 percent, reflecting the substantial impact of the acquisition of the Aquila utility properties on his job responsibilities. The acquisition more than doubled our utility assets from $830 million to $2.2 billion, tripled the number of utility employees and increased the number of state jurisdictions of our utility properties from three to seven. Base salaries were not increased in 2009, due to the difficult external economic conditions and uncertainties that existed at the time.24 PROXYprogram'sprogram’s goal for our corporate officers is based on earnings per share targets in order to closely align interests with shareholders and to fosterparticipant'sparticipant’s base salary. A target award is comparable to the average short-term incentive payout award of the comparatorpeer group at the 50th percentile level. The actual payout will vary, based on performance, between zero and 200 percent of the individual executive'sexecutive’s short-term incentive target award level.is applicableapplies to performance in the plan year. Target levels are derived in part from competitive data provided by the compensation consultant and in part by the Committee'sCommittee’s judgment regarding internal equity, retention and an individual executive'sexecutive’s expected contribution to the achievement of the Company'sour strategic objectives. The target levels for the positions held by our Named Executive Officers in 20102011 are shown below.70%80%50%60%COO-Non-regulated Energy50%50%CFO45%40% Sr. Vice President, Human Resources 40%40%20102011 Short-Term Incentive Plan are shown in the Grants of Plan Based Awards in 20102011 table on page 36,31, under the heading "Estimated“Estimated Possible Payouts Under Non-Equity Incentive Plan Awards."year'syear’s targets and to approve the actual payment of awards related to the prior plan year. The Committee reserves the discretion to adjust any award, and will review and take into account individual performance, level of contribution, and the accomplishment of specific project goals that were initiated throughout the plan year.20082009 and 2009,2010, for 2011 the Committee selected for 2010 a composite earnings per share goal that is weighted 80between non-energy marketing earnings and energy marketing earnings. Based on this methodology, the 2011 composite earnings per share goal was weighted 90 percent on non-energy marketing earnings per share and 2010 percent on energy marketing earnings per share. The Committee chose this weighted methodology because it addresses the volatility of our energy marketing segment'ssegment’s earnings and the potential for this volatility to disproportionately influence bonus outcomes for participants in the Short-Term Incentive Plan, both positively and negatively, and also because many participants arewere not directly involved in this businessthe energy marketing segment. It also meets the objectives of the plan, including:•••"buy-in"“buy-in” from the participants; and•PROXY 25the 2010 plan year2011 for the corporate officers as follows:Non-energy Marketing Energy Marketing Non-energy
Marketing
Earnings Per
Share Goal Energy
Marketing
Earnings Per
Share Goal Payout %
of Target Earnings Per Share Goal Payout % of Target $ 1.449 $ 0.360 30 % $1.69 $0.15 30% $ 1.610 $ 0.400 100 % $1.88 $0.17 100% $ 1.852 $ 0.460 200 % $2.16 $0.20 200% 20102011 was equal to budgeted earnings per share. On January 26, 2011,25, 2012, the Committee approved a payout of 16065.7 percent of target under the 20102011 Short-Term Incentive Plan, comprised of a 16049.4 percent payout (200(55 percent weighted 8090 percent) from non-energy marketing earnings and noa 16.3 percent payout (163 percent weighted 10 percent) from energy marketing earnings. The actual consolidated non-energy marketing earnings for 20102011 were $1.67$1.01 per share. After adjusting the earnings for the non-cash, mark-to-market loss of $0.68 per share on the forward interest rate swaps, one-time costs of $0.02 per share associated with the ratification of five union contracts and $0.05 per share for discontinued$1.92$1.76 per share. This resulted in a payout of 20055 percent of target for the non-energy marketing earnings goal. Energy marketing had net income of approximately $0.09$0.23 per share in 2010,2011. After adjusting downward $0.05 per share for impacts on accounting for discontinued operations, adjusted energy marketing earnings were $0.19 per share, resulting in noa 163 percent payout for the energy marketing earnings goal. The 20102011 award, after applicable tax withholding, was distributed in the form of 50 percent stock and 50100 percent cash to Mr. Cleberg. Messrs. Emery, Evans, Ohlmacher and Helmersall of our Named Executive Officers because they had met their stock ownership guidelines and elected to receive their 20102011 award in the form of 100 percent cash. Awards for corporate officers under the Short-Term Incentive Plan have varied significantly over the last five years, as shown below.
of TargetPayout % of Target 2011 66% 2010 160% 160% 2009 56% 56% 2008 52% 52% 2007 200% 200% 2006 150% 20102011 are included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 34.("(“Omnibus Incentive Plan"Plan”) which was previously approved by our shareholders. Long-term incentive compensation is intended to:••••26 PROXYthe 2010 plan year2011 for our Named Executive Officers is shown in the table below. Long-Term
Incentive Value Percentage of
Base Salary $ 630,000 105 % $800,000 123% $ 300,000 92 % $350,000 103% $ 380,000 106 % $400,000 103% $ 380,000 107 % $ 260,000 93 % $270,000 92% Robert A. Myers, Sr. Vice President, Human Resources $200,000 68% COOsCOO should have more of their total compensation at risk because they hold positions that have a greater impact on our long-term results. The long-term incentive value for these positions normally approximate 105 percent of base salary.20102011 are reflected in the tables in theRestricted Stock and Restricted Stock UnitsandPerformance Sharessections that follow.sharesstock and dividend equivalents accrue on restricted stock units. Unvested restricted stock or units are forfeited if an officer'sofficer’s employment is terminated for any reason other than death, disability or in the event of a change in control. Corporate officers may elect to receive the award in the form of restricted stock, or to defer the payment under the Nonqualified Deferred Compensation Plan, in the form of restricted stock units. The number of shares awarded in 20102011 for each of our Named Executive Officers is shown below and is included in the Grants of Plan Based Awards in 20102011 table under the heading "All“All Other Stock Awards: Number of Shares of Stock or Units"Units” and "Grant“Grant Date Fair Value of Stock Awards"Awards” on page 36.31.12,06413,206 5,7455,777 7,2776,603 Thomas M. Ohlmacher, COO-Non-regulated Energy7,2774,457 Robert A. Myers, Sr. Vice President, Human Resources 4,9793,301 PROXY 2723.22. In addition, in order for any performance shares to be awarded, our stock price must also increase during the performance period from the Beginning Stock Price for the performance periods that began in 2008 and 2009. For the performance periodperiods that began in 2010 and 2011, the Committee modified the plan, whereby the Ending Stock Price must be at least equal to 75 percent of the Beginning Stock Price, in order for any performance shares to be awarded. The final value of the performance shares is based upon the number of shares of common stock that are ultimately granted, based upon our performance in relation to the performance criteria. At the end of each respective performance period, actual awards may range from 0 percent to 175 percent of the target share amounts plus accrued dividends. A 100 percent payout of the target shares occurs if our total shareholder return exceeds the 50th percentile of the peer group. A zero percent payout occurs if we are below the 40th percentile and a maximum payout of 175 percent occurs if we perform at the 80th percentile or above. The performance awards and dividend equivalents, if earned, are paid in 50 percent cash and 50 percent common stock. All payroll deductions and applicable tax withholding related to the award are withheld from the cash portion. Performance share target grant values for new performance periods are approved in January of each year.20082009 to December 31, 2010,2011, our total shareholder return was negative 2046 percent, which ranked at the 1534th percentile of our peer group, resulting in no payout. Several factors significantly impacted our stock performance and our financial performance during this period of time, including a dramatic decrease in natural gas prices from mid-2008 levels and impacts from the global economic crisis that commenced in late 2008. Actual awards for the corporate Our officers have not received a payout under the Performance Share Plan over the last five years have varied significantly based on the Company's performance in relation to its peer groupplan since 2007 as shown in the table below.Performance Period Payout %
of Target0 January 1, 2008 to December 31, 2010 0 0 0 175 March 1, 2004 to December 31, 20063728 PROXY January 1, 2009 to
December 31, 2011
Performance Period January 1, 2010 to
December 31, 2012
Performance Period January 1, 2011 to
December 31, 2013
Performance Period 12,319 11,982 13,162 11,982 13,162 5,866 5,706 5,758 5,706 5,758 7,431 7,227 6,581 7,227 6,581 5,573 3,011 — 5,084 4,945 4,442 4,945 4,442 Robert A. Myers 3,328 3,291 *Mr. Ohlmacher retired on March 31, 2011; therefore he is not a participant in the January 1, 2011 to December 31, 2013 performance period and the target shares for the January 1, 2009 to December 31, 2011 and January 1, 2010 to December 31, 2012 performance periods have been pro-rated for his time served during the performance period.ChiefSr. Vice President, Human Resources, Officer, the CEO recommends the compensation for this group of officers to the Committee.corporation'sCompany’s financial targets and the CEO'sCEO’s goals and objectives for the year. At the end of each year, the Committee evaluates the CEO'sCEO’s performance in light of established goals and objectives, with input from the other independent directors. Based upon the Committee'sCommittee’s evaluation and recommendation, the independent directors of the Board set the CEO'sCEO’s annual compensation, including salary, short-term incentive, long-term incentive and equity compensation.CEO'sCEO’s evaluation of the performance of our senior officers and approves hisofficers. The Committee may approve the CEO’s compensation recommendations for this group of officers. The Committee mayofficers or exercise its discretion in modifying any of the recommended compensation and award levels in its review and approval process. The Committee is required to approve all decisions regarding equity awards to our officers."retention ratio"“retention ratio” approach to stock ownership is incorporated into the guidelines. This approach requires officersOfficers are expected to retain 100 percent of all shares owned, including shares awarded through our incentive plans (net of share withholding for taxes and in the case of cashless stock option exercises, net of the exercise price and withholding for taxes) until specific ownership goals are achieved. Ownership guidelines are denominated in share amounts whichthat approximate a multiple of base pay.PROXY 29 The ownership guidelines by officer level are as follows:Officer LevelOwnershipGuideline(# of Shares)CEO90,000COOs and CFO40,000Vice President and General Manager of Energy Marketing40,000Other Senior Executive Officers25,000Other Corporate Officers and Business Unit Leaders10,000Other Subsidiary Officers5,00031, 2011,1, 2012, are shown below. Ownership
Guideline
(# of Shares) Actual
Ownership
(# of Shares) Years
in
Position 90,000 111,954 7 90,000 121,411 8 40,000 32,817 2.5 40,000 44,656 3.5 40,000 46,217 6 40,000 60,735 7 40,000 47,449 9 25,000 41,045 10 25,000 43,407 11 Robert A. Myers, Sr. Vice President, Human Resources 25,000 25,215 3 2010 Benefits Perquisites and Other Personal Benefits. We provide a limited number of market-based perquisites to our executive officers, including personal use of a Company vehicle. The total value of these perquisites in 2010 did not exceed $9,000 for any one of our Named Executive Officers. The specific amounts attributable to perquisites for 2010 are disclosed in the Summary Compensation Table on page 34. The Committee periodically reviews the perquisites and other personal benefits provided to our executive officers and believes the current perquisites are reasonable and consistent with our overall compensation program. and Other Benefits. We maintain a variety of employee benefit plans and programs in which our executive officers may participate. We believe it is important to provide post-employment benefits to our executive officers and the benefits we provide approximate retirement benefits paid by other employers to executives in similar positions. The Committee periodically reviews the benefits provided, with assistance from its compensation consultant, to maintain a market-based benefits package. None of our Named Executive Officers received any pension benefit payments in the Companywe adopted a defined contribution plan design as our primary retirement plan and amended our Defined Benefit Pension Plan ("(“Pension Plan"Plan”) for all eligible employees to incorporate a partial freeze in which the accrual of benefits ceased for certain participants while other participants were allowed an election to continue to accrue benefits. Employees eligible to elect continued participation were those employees who were at least 45 years old and had at least 10 years of eligible service with the Companyus as of January 1, 2010. Each ofMr. Emery is our only Named Executive Officers are participants in the Pension Plan. Messrs. Emery and OhlmacherOfficer who met the age and years of service requirement and elected to stay with the existing Pension Plan. Messrs. Cleberg, Evans and Helmers did not meet the age and service requirement therefore theirand continues to accrue benefits under the Pension Plan. Employees whom no longer accrue benefits under the Pension Plan benefit was frozen as of January 1, 2010, and they now receive Company Retirement Contributions ("(“Retirement30 PROXYContributions" Contributions”) in the Retirement Savings Plan. The Retirement Contributions isare an age and service points-based calculation. Black Hills Corporation 401(k) Retirement Savings Plan is offered to all our eligible employees of the Company and its subsidiaries.we provide matching contributions for certain eligible participants. All of our Named Executive Officers are participants in the Black Hills Corporation 401(k) Retirement Savings Plan. Participants may elect to invest up to 50 percent of their eligible compensation on a combined pre-tax and/or after-tax basis up to maximum amounts established by the Internal Revenue Service. The Company provides for matching contributionsPlan and Retirement Contributions for certain eligible participants. Vesting of Company contributions ranges from immediate vesting to graduated vesting at 20 percent per year with full vesting when the participant has five years of service with the Company. All of our Named Executive Officers received matching contributions in 2010. Messrs. Cleberg, Evans and Helmers also received Retirement Contributions since their Pension Plan benefits were frozen.2011. The matching contributions and the Retirement Contributions are included as "All“All Other Compensation"Compensation” in the Summary Compensation Table on page 34. The Pension Plan, Retirement Contributions and matching contributions are limited by the29in the amount of compensation that can be taken into account in determining contributions and benefits, and in the case of the Pension Plan, the amount of annual payments received under the plan. Because of these limitations we also have the Nonqualified Pension Plans and the Nonqualified Deferred Compensation Plan. The Nonqualified Pension Plans include our Grandfathered Pension Equalization Plan, 2005 Pension Equalization Plan, Pension Restoration Plan and prior to its elimination on January 1, 2010, the 2007 Pension Equalization Plan. Messrs. Emery, Ohlmacher and Helmers are participants in the Grandfathered Pension Equalization Plan and the 2005 Pension Equalization Plan. Messrs. Cleberg and Evans were participants in the 2007 Pension Equalization Plan prior to its elimination. All of the Named Executive Officers are participants in the Pension Restoration Plan. As a result of the change in the Pension Plan, the benefits for certain officers (including Messrs. Cleberg, Evans and Helmers) under the Nonqualified Pension Plans were significantly reduced because the nonqualified benefit calculations were linked to the benefits earned in the Pension Plan. To overcome this deficit, the Committee eliminated the 2007 Pension Equalization Plan and amended the Nonqualified Deferred Compensation Plan to provide non-elective nonqualified restoration benefits to those affected officers who were not eligible to continue accruing benefits under the Pension Plan and associated Nonqualified Pension Plans. The amended Nonqualified Deferred Compensation Plan provides the affected officers with non-elective supplemental matching contributions equal to six percent of eligible compensation in excess of the Internal Revenue Code limit plus matching contributions, if any, lost under the 401(k) Retirement Savings Plan due to nondiscrimination test results and provides non-elective supplemental points-based contributions that cannot be made to the 401(k) Retirement Savings Plan due to the Internal Revenue Code limit. It also provides supplemental target contributions equal to a percentage of compensation that may differ by executive, basedimposed on the executive's current age and length of service with the Company, as determined by the Plan's actuary.201039. The Company's34. Our contributions to the Nonqualified Deferred Compensation Plan are included in the Other Compensation column of the Summary Compensation Table on page 3429 and the aggregate Nonqualified Deferred Compensation balance at December 31, 20102011 is reported in the Nonqualified Deferred Compensation for 20102011 table on page 42.37. These retirement benefits are explained in more detail in the accompanying narrative to the tables.PROXY 31Other Personal Benefits. of Contentson page 29. The Committee periodically reviews the other personal benefits provided to our executive officers and believes the current benefits are reasonable and consistent with our overall compensation program.ChangeWe have no employment agreements with our Named Executive Officers. However, change in control agreements are common among our peer group and the Committee and our Board of Directors believe providing these agreements to our corporate officers protects our shareholder interests in the event of a change in control by helping assure management focus and continuity. Our change in control agreements have expiration dates and our Board of Directors conducts a thorough review of the change in control agreements at each renewal period. In 2010, new change in control agreements were entered into to reflect the retirement plan changes that were effective January 1, 2010. In addition, the excise tax gross-up provision that existed in the prior agreements was removed from the new agreements. The newOur current change in control agreements expire November 15, 2013. In general, our change in control agreements provide a severance payment of up to 2.99 times average compensation for our CEO, and up to two times average compensation for the other Named Executive Officers. The change in control agreements do not provide for excise tax gross-ups and contain a "double“double trigger,"” providing benefits in association with a change in control only upon:(i)termination of employment other than by death, disability or by the Company for cause, or(1) a change in control, and (2) (i) a termination of employment other than by death, disability or by us for cause, or (ii) a termination by the employe for good reason. (ii)a termination by the employee for good reason.4338 and the accompanying narrative for more information regarding our change in control agreements and estimated payments associated with a change in control."performance-based"“performance-based” is excluded from the $1 million limit, if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals under a plan approved by the corporation'scorporation’s shareholders. As a result, theThe Compensation Committee has designedgenerally manages a large share of our incentive compensation for our Named Executive Officers to qualify for the exemption of "performance-based" compensation from the deductibility limit. However, the Compensation Committee does have“performance-based” exemption. It also has the discretion to design and use compensation elements that may not be deductible under Section 162(m) if it determines those elements are in line with competitive practice, our compensation philosophy, and our best interests. We believe the compensation paid to our Named Executive Officers in 2010 is fully deductible.effective beginning with 2009our award agreements for restricted stock and target performance shares we have includedinclude clawback provisions whereby the participant may be required to repay all income or gains previously realized in respect of such awards if their employment is terminated for cause, or within one year following termination of employment, the Board determines that the participant engaged in conduct prior to their termination that would have constituted the basis for a termination of employment for cause.32 PROXYthe Company'sour Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.proxy statement.THE COMPENSATION COMMITTEEJack W. Eugster, ChairpersonDavid C. EbertzKay S. JorgensenStephen D. NewlinThomas J. ZellerPROXY 33fiscal years ended December 31, 2011, 2010 2009 and 2008.2009. We have no employment agreements with our Named Executive Officers. Mr. Cleberg joined us on July 16, 2008.
Principal Position
Principal Position Year Salary Stock
Awards(1) Non-Equity
Incentive Plan
Compensation(2) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings(3) All
Other
Compensation(4) Total Year Salary Total 2010 $ 588,924 $ 605,554 $ 672,000 $ 766,046 $ 60,138 $ 2,692,662 2011 $ 638,462 $ 741,037 $ 341,803 $ 1,263,510 $ 61,133 $ 3,045,945 2009 $ 564,000 $ 674,723 $ 221,088 $ 361,799 $ 51,990 $ 1,873,600 2008 $ 563,269 $ 867,400 $ 205,296 $ 549,730 $ 42,293 $ 2,227,988 Chairman, President and Chief Executive Officer 2010 $ 588,924 $ 605,554 $ 672,000 $ 766,046 $ 60,138 $ 2,692,662 2009 $ 564,000 $ 674,723 $ 221,088 $ 361,799 $ 51,990 $ 1,873,600
2010
$
321,923
$
288,372
$
234,000
—
$
149,607
$
993,902 2011 $ 336,538 $ 324,175 $ 111,743 $ 9,640 $ 229,078 $ 1,011,174 2009 $ 315,000 $ 321,300 $ 79,380 $ 102,058 $ 198,778 $ 1,016,516 2008 $ 130,846 $ 225,000 $ 34,020 $ 3,645 $ 25,911 $ 419,422 Executive Vice President and Chief Financial Officer 2010 $ 321,923 $ 288,372 $ 234,000 $ — $ 149,607 $ 993,902 2009 $ 315,000 $ 321,300 $ 79,380 $ 102,058 $ 198,778 $ 1,016,516
2010
$
333,538
$
365,257
$
288,000
—
$
148,397
$
1,135,192 2011 $ 383,077 $ 370,519 $ 153,812 $ 58,978 $ 223,235 $ 1,189,621 2009 $ 274,000 $ 406,978 $ 76,720 $ 102,553 $ 29,086 $ 889,337 2008 $ 273,212 $ 395,908 $ 71,240 $ 125,292 $ 24,421 $ 890,073
2010
$
353,769
$
365,257
$
284,000
$
734,583
$
43,383
$
1,780,992 2009 $ 351,000 $ 406,978 $ 98,280 $ 312,019 $ 35,125 $ 1,203,402 2008 $ 350,600 $ 466,020 $ 91,260 $ 292,809 $ 28,915 $ 1,229,604 President and Chief Operating Officer – Utilities 2010 $ 333,538 $ 365,257 $ 288,000 $ — $ 148,397 $ 1,135,192 2009 $ 274,000 $ 406,978 $ 76,720 $ 102,553 $ 29,086 $ 889,337
2010
$
276,923
$
249,918
$
179,200
$
178,390
$
74,271
$
958,702 2011 $ 291,538 $ 250,095 $ 77,563 $ 249,809 $ 96,448 $ 965,453 2009 $ 270,000 $ 278,462 $ 76,720 $ 113,474 $ 26,231 $ 764,887 2008 $ 269,604 $ 265,550 $ 49,140 $ 121,460 $ 21,648 $ 727,402 Sr. Vice President and General Counsel 2010 $ 276,923 $ 249,918 $ 179,200 $ 178,390 $ 74,271 $ 958,702 2009 $ 270,000 $ 278,462 $ 76,720 $ 113,474 $ 26,231 $ 764,887 Robert A. Myers 2011 $ 292,000 $ 185,257 $ 77,563 $ — $ 173,436 $ 728,256 Sr. Vice President, Human Resources 2010 $ 279,846 $ 168,199 $ 180,480 $ — $ 125,821 $ 754,346 2009 $ 261,322 $ 287,404 $ 61,600 $ 28,938 $ 101,990 $ 741,254 (1)Stock Awards represent the grant date fair value related to restricted stock, restricted stock units and performance shares that have been granted as a component of Long-Term Incentive Compensation. The grant date fair value is computed in accordance with the provisions of accounting standards for stock compensation. Assumptions used in the calculation of these amounts are included in Note 11 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2010. The amount included for performance shares is based on the level the award is expected to payout. If the award were based on the maximum payout level, the amounts for the Stock Awards column would be increased to the following amounts:(1) 2010 2009 2008 2011 2010 2009 $ 823,477 $ 944,509 $ 1,105,450 $ 996,808 $ 823,477 $ 944,509 $ 392,150 $ 449,766 $ 225,000 $ 436,067 $ 392,150 $ 449,766 $ 496,698 $ 569,717 $ 490,714 $ 498,404 $ 496,698 $ 569,717 $ 496,698 $ 569,717 $ 616,785 $ 339,854 $ 389,802 $ 329,375 $ 336,414 $ 339,854 $ 389,802 Robert A. Myers $ 249,209 $ 228,727 $ 362,347 (2)(2) Annual Incentive Plan. The Compensation Committee approved the payout of the 2011 awards at its January 25, 2012 meeting and the awards were paid on March 2, 2012.(3) Change in Pension Value and Nonqualified Deferred Compensation Earnings represents the net positive increase in actuarial value of the Pension Plan, Pension Restoration Benefit (“PRB”) and Pension Equalization Plans (“PEP”) for the respective years. Compensation Committee approved the payout of the 2010 awards at its January 26, 2011, meeting and the awards were paid on March 4, 2011.(3)Change in Pension Value and Nonqualified Deferred Compensation Earnings represents the net positive increase in actuarial value of the Defined Benefit Pension Plan, Pension Restoration Benefit ("PRB") and Pension Equalization Plans ("PEP") for the respective year.The Defined Benefit Pension Plan and PRB were frozen as of December 31, 2009effective January 1, 2010 for participants thatwho did not satisfy the age 45 and 10 years of service eligibility. Messrs. Cleberg, Evans and Helmers did not meet the eligibility choice criteria and their Defined Pension and PRB benefits were frozen. In 2008, Mr. ClebergMyers did not meet the one year service requirement prior to bethe freeze date and therefore was never in the Defined BenefitPension Plan. The amounts for 2008 were annualized due to the change in ASC 715 measurement date. The change in present value of the accumulated benefit from September 30, 2007 to December 31, 2008 has been multiplied by 12/15ths to determine a twelve month value (except for Mr. Cleberg who did not accrue benefits for the entire 15 month period).34 PROXY("(“Grandfathered PEP"PEP”), 2005 Pension Equalization Plan ("(“2005 PEP"PEP”) and 2007 Pension Equalization Plan ("(“2007 PEP"PEP”). Messrs. Emery Ohlmacher and Helmers are participants in the Grandfathered PEP and 2005 PEP. Messrs. Cleberg, Evans and Myers were the only Named Executive Officers participating in the 2007 PEP. The 2007 PEP was eliminated effective January 1, 2010 and was replaced with employer contributions into a NonqalifiedNonqualified Deferred Compensation Plan ("NQDC"(“NQDC”). The NQDC employer contributions are reported in the All Other Compensation column. Messrs. Cleberg and Evans were the only Named Executive Officers participating in the 2007 PEP.from each plan to each Named Executive Officer from each plan is shown in the table below. Year Defined
Benefit Plan PRB PEP Total Change in
Pension Value PEP Total Change in Pension Value 2010 $ 88,118 $ 369,162 $ 308,766 $ 766,046 2011 $ 127,968 $ 627,383 $ 508,159 $ 1,263,510 2009 $ 43,690 $ 167,024 $ 151,085 $ 361,799 2010 $ 88,118 $ 369,162 $ 308,766 $ 766,046 2008 $ 33,858 $ 264,299 $ 251,573 $ 549,730 2009 $ 43,690 $ 167,024 $ 151,085 $ 361,799
2010
$
3,713
$
2,660
$
(52,506
)
— 2011 $ 6,644 $ 2,996 $ — $ 9,640 2009 $ 36,790 $ 12,762 $ 52,506 $ 102,058 2010 $ 3,713 $ 2,660 $ (52,506 ) $ — 2008 — $ 3,645 — $ 3,645 2009 $ 36,790 $ 12,762 $ 52,506 $ 102,058
2010
$
22,976
$
19,195
$
(163,783
)
— 2011 $ 33,608 $ 25,370 $ — $ 58,978 2009 $ 25,375 $ 24,629 $ 52,549 $ 102,553 2010 $ 22,976 $ 19,195 $ (163,783 ) $ — 2008 $ 19,368 $ 48,132 $ 57,792 $ 125,292 2009 $ 25,375 $ 24,629 $ 52,549 $ 102,553
2010
$
218,327
$
323,252
$
193,004
$
734,583 2009 $ 131,901 $ 96,327 $ 83,791 $ 312,019 2008 $ 101,389 $ 109,258 $ 82,162 $ 292,809
2010
$
28,263
$
18,239
$
131,888
$
178,390 2011 $ 37,490 $ 22,071 $ 190,248 $ 249,809 2009 $ 34,129 $ 18,295 $ 61,050 $ 113,474 2010 $ 28,263 $ 18,239 $ 131,888 $ 178,390 2008 $ 26,157 $ 22,526 $ 72,777 $ 121,460 2009 $ 34,129 $ 18,295 $ 61,050 $ 113,474 Robert A. Myers 2011 $ — $ — $ — $ — 2010 $ — $ — $ (28,938 ) $ — 2009 $ — $ — $ 28,938 $ 28,938 (4)All Other Compensation includes amounts allocated under the 401(k) match, defined contributions, NQDC contributions, dividends received on restricted stock and unvested restricted stock units and perquisites. Mr. Cleberg's 2008 and 2009 perquisites also include temporary living, travel and other relocation expenses, including an $89,050 loss on the sale of his home in 2009.(4) All Other Compensation includes amounts allocated under the 401(k) match, defined contributions, NQDC contributions, dividends received on restricted stock and other personal benefits. Mr. Cleberg’s 2009 other personal benefits also include temporary living, travel and other relocation expenses, including an $89,050 loss on the sale of his home in 2009. Year 401(k)
Match Defined
Contri-
bution NQDC
Contri-
bution Dividends
on
Restricted
Stock/Units Perquisites Total
Other
Compensation Year 2010 $ 14,700 — — $ 37,378 $ 8,060 $ 60,138 2011 $ 14,700 — — $ 38,494 $ 7,939 $ 61,133 2010 $ 14,700 $ 7,350 $ 100,347 $ 18,484 $ 8,726 $ 149,607 2011 $ 14,700 $ 7,350 $ 181,263 $ 18,370 $ 7,395 $ 229,078 2010 $ 14,700 $ 7,350 $ 96,925 $ 21,824 $ 7,598 $ 148,397 2011 $ 14,700 $ 7,350 $ 172,562 $ 21,225 $ 7,398 $ 223,235 2010 $ 14,700 — — $ 20,989 $ 7,694 $ 43,383 2010 $ 14,700 $ 7,350 $ 31,935 $ 14,859 $ 5,427 $ 74,271 2011 $ 14,700 $ 7,350 $ 54,062 $ 14,414 $ 5,922 $ 96,448 Robert A. Myers 2011 $ 14,700 $ 7,296 $ 129,144 $ 11,426 $ 10,870 $ 173,436 PROXY 352010(1)
2011(1) Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(2) Estimated Future Payouts
Under Equity Incentive Plan
Awards(3) All Other
Stock Awards:
Number of
Shares of
Stock or
Units(4)
(#) Date of
Comp-
ensation
Committee
Action Grant Date
Fair Value
of Stock
Awards(5)
($) Grant
Date Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#)All Other
Stock Awards:
Number of
Shares of
Stock or
Units(4)
(#)Date of Comp-ensation Committee Action Name Threshold(#) $ 126,000 $ 420,000 $ 840,000 $ 156,000 $ 520,000 $ 1,040,000 1/27/10 1/27/10 5,991 11,982 20,969 $ 290,564 2/01/10 1/27/10 12,064 $ 314,991 David R. Emery 1/26/11 6,581 13,162 23,034 $ 341,027 2/7/11 1/26/11 13,206 $ 400,010
$
43,875
$
146,250
$
292,500 $ 51,000 $ 170,000 $ 340,000 1/27/10 1/27/10 2,853 5,706 9,986 $ 138,371 2/01/10 1/27/10 5,745 $ 150,002 Anthony S. Cleberg 1/26/11 2,879 5,758 10,077 $ 149,190 2/7/11 1/26/11 5,777 $ 174,985
$
54,000
$
180,000
$
360,000 $ 70,200 $ 234,000 $ 468,000 1/27/10 1/27/10 3,614 7,227 12,647 $ 175,255 2/01/10 1/27/10 7,277 $ 190,002
$
53,250
$
177,500
$
355,000 1/27/10 1/27/10 3,614 7,227 12,647 $ 175,255 2/01/10 1/27/10 7,277 $ 190,002 Linden R. Evans 1/26/11 3,291 6,581 11,517 $ 170,514 2/7/11 1/26/11 6,603 $ 200,005
$
33,600
$
112,000
$
224,000 $ 35,400 $ 118,000 $ 236,000 1/27/10 1/27/10 2,473 4,945 8,654 $ 119,916 2/01/10 1/27/10 4,979 $ 130,002 Steven J. Helmers 1/26/11 2,221 4,442 7,774 $ 115,092 2/7/11 1/26/11 4,457 $ 135,003 $ 35,400 $ 118,000 $ 236,000 Robert A. Myers 1/26/11 1,646 3,291 5,759 $ 85,270 2/7/11 1/26/11 3,301 $ 99,987 (1) (2) (3) The columns under “Estimated Future Payouts Under Equity Incentive Plan Awards” show the range of payouts (in shares of stock) for the January 1, 2011 to December 31, 2013 performance period as described in the Compensation Discussion and Analysis under the section titled “Long-Term Incentive – Performance Shares” on page 25. If the performance criteria are met, payouts can range from 50 percent of target to 175 percent of target. If a participant retires, suffers a disability or dies during the performance period, the participant or the participant’s estate is entitled to that portion of the number of performance shares as such participant would have been entitled to had he or she remained employed, prorated for the number of months served. Performance shares are forfeited if employment is terminated for any other reason. During the performance period, dividends and other distributions paid with respect to the shares of common stock accrue for the benefit of the participant and are paid out at the end of the performance period. (1)No stock options were granted to our Named Executive Officers in 2010.(2)The columns under "Estimated Possible Payouts Under Non-Equity Incentive Plan Awards" show the range of payouts for 2010 performance under our Short-Term Incentive Plan as described in the Compensation Discussion and Analysis under the section titled "Short-Term Incentive" on page 24. If the performance criteria are met, payouts can range from 30 percent of target at the threshold level to 200 percent of target at the maximum level. The 2011 bonus payment for 2010 performance has been made based on achieving the criteria described in the Compensation Discussion and Analysis, at 160 percent of target, and is shown in the Summary Compensation Table on page 34 in the column titled "Non-Equity Incentive Plan Compensation."(3)The columns under "Estimated Future Payouts Under Equity Incentive Plan Awards" show the range of payouts (in shares of stock) for the January 1, 2010 to December 31, 2012 performance period as described in the Compensation Discussion and Analysis under the section titled "Long-Term Incentive—Performance Shares" on page 27. If the performance criteria are met, payouts can range from 50 percent of target to 175 percent of target. If a participant retires, suffers a disability or dies during the performance period, the participant or the participant's estate is entitled to that portion of the number of performance shares as such participant would have been entitled to had he or she remained employed, prorated for the number of months served. Performance shares are forfeited if employment is terminated for any other reason. During the performance period, dividends and other distributions paid with respect to the shares of common stock shall accrue for the benefit of the participant and are paid out at the end of the performance period.(4)The column "All Other Stock Awards" reflects the number of shares of restricted stock granted on February 1, 2010 under our 2005 Omnibus Incentive Plan. The restricted stock vests one-third a year over a three-year period, and automatically vests upon death, disability or a change in control. Unvested restricted stock is forfeited if employment is terminated for any other reason. Dividends are paid on the restricted shares and the dividends that were paid in 2010 are included in the column titled "All Other Compensation" in the Summary Compensation Table on page 34.(5)The column "Grant Date Fair Value of Stock Awards" reflects the grant date fair value of each equity award computed in accordance with the provisions of accounting standards for stock compensation. The grant date fair value for the performance shares was $24.25 per share and was calculated using a Monte Carlo simulation model. Assumptions used in the calculation are included in Note 11 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2010. The grant date fair value for the restricted stock was $26.11 per share for the February 1, 2010 grant which was the market value of our common stock on the date of grant as reported on the New York Stock Exchange.36 PROXY(4) (5) 2010(1)2011(1) Option Awards Stock Awards Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) Option
Exercise
Price
($) Option
Expiration
Date Number of
Shares or
Units of
Stock That
Have Not
Vested(2)
(#) Market Value
of Shares
or Units
of Stock
That Have Not
Vested
($) Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have
Not Vested(2)
(#) Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have
Not Vested
($) Option Awards Stock Awards Option Expiration Date 5,000 $ 55.36 5/30/11 24,688 $ 740,640 27,129 $ 813,840 4,595 $ 35.10 4/23/12 25,097 $ 842,757 12,572 $ 422,168 4,595 $ 35.10 4/23/12 7,500 $ 27.49 3/31/13 7,500 $ 27.49 3/31/13 13,787 $ 28.09 5/15/13 13,787 $ 28.09 5/15/13
—
—
—
11,694
$
350,820
12,919
$
387,555 — — — 11,440 $ 384,155 5,732 $ 192,481
2,000
$
32.34
6/17/12
14,394
$
431,820
16,363
$
490,883 2,000 $ 32.34 6/17/12 13,776 $ 462,598 6,905 $ 231,836 3,000 $ 25.16 12/10/12 3,000 $ 25.16 12/10/12 5,000 $ 29.83 12/31/13 5,000 $ 29.83 12/31/13
2,500
$
55.36
5/30/11
14,195
$
425,850
16,363
$
490,883
9,000
$
55.36
5/30/11
9,811
$
294,330
11,196
$
335,873 10,110 $ 35.10 4/23/12 9,365 $ 314,477 4,694 $ 157,608 10,110 $ 35.10 4/23/12 Robert A. Myers — — — 7,826 $ 262,797 3,310 $ 111,133 (1) (2) (1)There were no unexercisable stock options or unexercised unearned options under equity incentive plans outstanding at December 31, 2010 for our Named Executive Officers.(2)Vesting dates for restricted stock, restricted stock units and performance shares are shown in the table below. The performance shares shown with a vesting date of December 31, 2010, reflect no payout for the performance period ended December 31, 2010. On January 26, 2011 the Compensation Committee confirmed that the performance criteria were not met and there would be no payout. The performance shares with a vesting date of December 31, 2011 are shown at the threshold payout level and the performance shares with a vesting date of December 31, 2012 are shown at a maximum payout level, based upon the performance as of December 31, 2010. Unvested Restricted Stock and Restricted Stock Units Unvested and Unearned
Performance Shares # of Shares Vesting Date # of Shares Vesting Date # of Shares Vesting Date # of Shares Vesting Date
3,848
1/02/11
—
12/31/10 3,848 01/02/12 — 12/31/11 2,390 1/04/11 6,160 12/31/11 4,021 2/01/11 20,969 12/31/12 4,021 02/01/12 5,991 12/31/12 2,538 8/13/11 4,402 02/07/12 6,581 12/31/13 3,848 1/02/12 4,022 02/01/13 4,021 2/01/12 4,402 02/07/13 4,022 2/01/13 4,402 02/07/14
1,832
1/02/11
2,933
12/31/11 1,833 01/02/12 — 12/31/11 1,915 2/01/11 9,986 12/31/12 1,915 02/01/12 2,853 12/31/12 2,284 8/13/11 1,925 02/07/12 2,879 12/31/13 1,833 1/02/12 1,915 02/01/13 1,915 2/01/12 1,926 02/07/13 1,915 2/01/13 1,926 02/07/14
2,321
1/02/11
—
12/31/10 2,321 01/02/12 — 12/31/11 952 1/04/11 3,716 12/31/11 2,426 02/01/12 3,614 12/31/12 2,425 2/01/11 12,647 12/31/12 2,201 02/07/12 3,291 12/31/13 1,523 8/13/11 2,426 02/01/13 2,321 1/02/12 2,201 02/07/13 2,426 2/01/12 2,201 02/07/14 Steven J. Helmers 1,588 01/02/12 — 12/31/11 2,426 2/01/13 1,660 02/01/12 2,473 12/31/12 1,485 02/07/12 2,221 12/31/13 1,660 02/01/13 1,486 02/07/13 1,486 02/07/14 Robert A. Myers 2,291 01/02/12 — 12/31/11 1,117 02/01/12 1,664 12/31/12 1,100 02/07/12 1,646 12/31/13 1,117 02/01/13 1,100 02/07/13 1,101 02/07/14 PROXY 37Table of Contents Unvested Restricted Stock and Restricted Stock Units Unvested and Unearned
Performance Shares # of Shares Vesting Date # of Shares Vesting Date 2,321 1/02/11 — 12/31/10 1,514 1/04/11 3,716 12/31/11 2,425 2/01/11 12,647 12/31/12 762 8/13/11 2,321 1/02/12 2,426 2/01/12 2,426 2/01/13
1,588
1/02/11
—
12/31/10 641 1/04/11 2,542 12/31/11 1,659 2/01/11 8,654 12/31/12 1,015 8/13/11 1,588 1/02/12 1,660 2/01/12 1,660 2/01/13 Option Awards Stock Awards(1) Name Option Awards Number of
Shares Acquired
on Exercise
(#) Value Realized
on Exercise
($) Number of
Shares Acquired
on Vesting
(#) Value Realized
on Vesting
($) — — 11,517 $ 317,574 — 9,038 $390,432 — — 4,116 $ 120,047 — 4,943 $182,283 — — 5,869 $ 162,973 — 5,179 $220,233 — — 6,302 $ 170,857 — — 4,014 $ 111,321 — 3,501 $149,572 Robert A. Myers — 3,048 $104,198 (1) (1)Reflect restricted stock that vested in 2010.38 PROXY20102011 Pension benefits for our Named Executive Officers in 2010 were comprised of a qualified defined benefit pension, a nonqualified pension restoration benefit and a supplemental pension benefit. None of our Named Executive Officers received any pension benefit payments during the fiscal year ended December 31, 2010. Effective2010, the Company2010. We adopted a defined contribution plan design as our primary retirement plan and amended our Pension Plan and Nonqualified Pension Plans for all eligible employees to incorporate a partial freeze in which the accrual of benefits ceased for certain participants while other participants were allowed an election to continue to accrue benefits. Employees eligible to elect continued participation were those employees who were at least 45 years old and had at least 10 years of eligible service with the Companyus as of January 1, 2010. Plan Name Number of Years
of Credited
Service(1) (#) Present Value
of Accumulated
Benefit(2) ($) 21.33 $ 368,527 21.33 $ 1,289,467 16.00 $ 455,498 16.00 $ 956,489
1.42
$
40,503 1.42 $ 19,067
8.58
$
130,760 8.58 $ 103,989
36.50
$
1,229,147 36.50 $ 1,757,893 19.00 $ 1,303,896 19.00 $ 134,142
8.92
$
187,555 8.92 $ 115,749 9.00 $ 126,126 9.00 $ 636,281 (1)The number of years of credited Mr. Emery is our only Named Executive Officer who met the age and service representsrequirement and continues to accrue benefits under the number of years usedPension Plan and the Pension Restoration Plan. Benefits under the Pension Plan and Pension Restoration Plan were frozen for Messrs. Cleberg, Evans and Helmers. Mr. Myers did not meet the one year service requirement prior to the freeze date and therefore was never in determining the benefit for each plan. ThePension Plan. In addition, Messrs. Emery and Helmers receive supplemental pension benefits under the Grandfathered Pension Equalization Plans are not directly tied to service but ratherPlan which was frozen effective December 31, 2004, and the number2005 Pension Equalization Plan. None of years of participation inour Named Executive Officers received any pension benefit payments during the plan.fiscal year ended December 31, 2011.(2)of accumulated benefits was calculated assuming benefits commence at age 62 and usingby each Named Executive Officer from each plan is shown in the discount rate, mortality rate and assumed payment form assumptions consistent with those disclosed in Note 18 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2010.table below.Name Plan Name David R. Emery Pension Plan 22.33 $ 496,495 Pension Restoration Benefit 22.33 $ 1,916,850 Grandfathered Pension Equalization Plan 17.00 $ 556,869 2005 Pension Equalization Plan 17.00 $ 1,363,276 Anthony S. Cleberg Pension Plan 1.42 $ 47,147 Pension Restoration Benefit 1.42 $ 22,063 Linden R. Evans Pension Plan 8.58 $ 164,368 Pension Restoration Benefit 8.58 $ 129,359 Steven J. Helmers Pension Plan 8.92 $ 225,045 Pension Restoration Benefit 8.92 $ 137,820 Grandfathered Pension Equalization Plan 10.00 $ 146,943 2005 Pension Equalization Plan 10.00 $ 805,712 Robert A. Myers No Benefits (1) The number of years of credited service represents the number of years used in determining the benefit for each plan. The Pension Equalization Plans are not directly tied to service but rather the number of years of participation in the plan. (2) We have aEmployees eligible to elect continued participation were those employeesMr. Emery was the only Named Executive Officer who were at least 45 years old and had at least 10 years of eligible service with the Company as of January 1, 2010. Messrs. Emery and Ohlmacher met the age and years of service requirement and elected to continue with the existing plan.PROXY 39 Participants who did not meet the age and years of service requirement as of January 1, 2010, had their pension benefit frozen as of December 31, 2009 and effective January 1, 2010 began to receive an additional age and service points-based employer contribution under the 401(k) retirement savings plan. Messrs. Cleberg, Evans and Helmers had their pension benefits frozen as of December 31, 2009, and began receiving the additional age and service points-based employer contribution effective January 1, 2010.the Company,us, including any bonus, commission, unused paid time off or incentive compensation. It also includes any elective before-tax contributions made by the employee to a Company sponsored cafeteria plan or 401(k) plan. However, it does not include any expense reimbursements, taxable fringe benefits, moving expenses or moving/relocation allowances, nonqualified deferred compensation, non-cash incentives, stock options and any payments of long-term incentive compensation such as restricted stock or payments under performance share plans. The Internal Revenue Code places maximum limitations on the amount of compensation that may be recognized when determining benefits of qualified pension plans. In 2010,2011, the maximum amount of compensation that could be recognized when determining compensation was $245,000 (called "covered compensation"“covered compensation”).(a) Credited Service after January 31, 2000
0.9% of average earnings (up to covered compensation), multiplied by credited service after January 31, 2000 minus the number of years of credited service before January 31, 2000Plus
1.3% of average earnings in excess of covered compensation, multiplied by credited service after January 31, 2000 minus the number of years of credited service before January 31, 2000
(b) Plus(b)
Credited Service before January 31, 2000
1.2% of average earnings (up to covered compensation), multiplied by credited service before January 31, 2000Plus
1.6% of average earnings in excess of covered compensation, multiplied by credited service before January 31, 20002010,2011, the maximum benefit payable under qualified pension plans was $195,000. Accrued benefits become 100 percent vested after an employee completes five years of service. None of our Named Executive Officers havehas been credited with extra years of credited service under the plan.plan, howeverplan. However, a participant may retire and begin taking unreduced benefits at age 62 with five years of service. Participants who have completed at least five years of credited service can retire and receive defined benefit pension benefits as early as age 55, however55. However, the retirement benefit will be reduced by five percent for each year of retirement before age 62. For example, a participant with at least five years of credited service may retire at age 55 and receive a pension benefit equal to 65 percent of the normal retirement benefit. Mr. OhlmacherHelmers is currently age 5955 and is entitled to early retirement benefits under this provision. If ais vested and leaves the Company beforewho has left employment with us prior to reaching his or her earliest retirement date he or shebut who was vested in retirement benefits under the Pension Plan may begin receiving the full value of his or her vested benefit at age 65 or can receive a reduced benefit as early as age 55 if he or she has at least five years of credited service when he or she leaves employment of the Company.with us. The benefit will be reduced by five percent for each year he or40 PROXYthe Companyemployment with us before reaching age 55 with at least five years of credited service may begin receiving benefits at age 55 equal to 50 percent of the normal retirement benefit and may begin receiving retirement benefits at age 65 on an unreduced basis. Our employees do not contribute to the plan. The amount of the annual contribution by us to the plan is based on an actuarial determination.Benefit, nonqualified supplemental plans, in which benefits are not tax deductible until paid.Benefit. Prior to January 1, 2010, we also had a 2007 Pension Equalization Plan. These are nonqualified supplemental plans, in which benefits are not tax deductible until paid. The plans are designed to provide the higher paid executive employee a retirement benefit which, when added to social security benefits and the pension to be received under the Defined Benefit Pension Plan, will approximate retirement benefits being paid by other employers to their employees in similar executive positions. The employee'semployee’s pension from the qualified pension plan is limited by the Internal Revenue Code. The 20102011 pension limit was set at $195,000 annually and the compensation taken into account in determining contributions and benefits could not exceed $245,000 and could not include nonqualified deferred compensation. The amount of deferred compensation paid under nonqualified plans is not subject to these limits.Helmers)Myers) under the Nonqualified Pension Plans were significantly reduced because the nonqualified benefit calculations were linked to the benefits earned in the Pension Plan. As a result, of those amendments, effective January 1, 2010, the Compensation Committee eliminated the 2007 Pension Equalization Plan and amended the Nonqualified Deferred Compensation Plan to provide non-elective nonqualified restoration benefits to those affected officers who were not eligible to continue accruing benefits under the Pension Plan and associated Nonqualified Pension Plans. Participants were designated by our Board of Directors upon recommendation of the CEO. Ohlmacher and Helmers are fully vested participants in the Grandfathered and 2005 Pension Equalization Plans. Messrs. Cleberg, Evans and EvansMyers are not participants in these plans.employee'semployee’s average earnings, if salary was less than two times the Social Security Wage Base, or 30 percent, if salary was more than two times the Social Security Wage Base, multiplied by the vesting percentage. Average earnings are normally an employee'semployee’s average earnings for the five highest consecutive full years of employment during the ten full years of employment immediately preceding the year of calculation. The annual benefit is paid on a monthly basis for 15 years to each participating employee and, if deceased, to the employee'semployee’s designatedPROXY 41anour employee of the Company may elect to be paid benefits beginning at age 55 or older, subject to a discount of such benefits according to the following schedule.Age at Start of Payments % of Benefit Payable Age at Start of Payments % of Benefit Payable 61 93.0 % 57 69.7 % 60 86.5 % 56 64.8 % 59 80.5 % 55 60.3 % 58 74.9 % Age at Start of Payments % of Benefit Payable Age at Start of Payments % of Benefit Payable 61 93.0% 57 69.7% 60 86.5% 56 64.8% 59 80.5% 55 60.3% 58 74.9% 2010. The annual benefit was 2 percent of the employee's average earnings multiplied by the participant's years of service as an officer (up to a maximum of 15 years)2010 and the vesting percentage.there are no benefits payable under this plan. Messrs. Cleberg, Evans and EvansMyers were participants in the 2007 Pension Equalization Plan.participant'sparticipant’s retirement, the participant'sparticipant’s salary level exceeds the qualified pension plan annual compensation limitation ($245,000 in 2010)2011) or includes nonqualified deferred compensation, then the participant shallwill receive an additional benefit, called a "Pension“Pension Restoration Benefit,"” which is measured by the difference between (i) the monthly benefit which would have been provided to the participant under the Pension Plan as if there were no annual compensation limitation and no exclusion on nonqualified deferred compensation, and (ii) the monthly benefit to be provided to the participant under the Pension Plan. The Pension Restoration Benefit applies to all of the Named Executive Officers that have a Pension Benefit.2010201120102011 for our Named Executive Officers is shown in the following table. Our Named Executive Officers made no personal contributions and received no withdrawals or distributions from the plan in 2010.2011. Executive
Contributions in
Last Fiscal Year
(1) Company
Contributions in
Last Fiscal Year
(2) Aggregate
Earnings in
Last Fiscal Year
(3) Aggregate
Balance at Last
Fiscal Year End
(4) — — — — — — —
—
$
100,347
$
2,308
$
102,655 $ 151,964 $ (9,236 ) $ 245,383
—
$
96,925
$
2,229
$
99,154 $ 172,562 $ (1,447 ) $ 270,269
$
88,443
—
$
56,189
$
1,293,241
—
$
31,935
$
734
$
32,669 $ 54,062 $ (1,465 ) $ 85,267 Robert A. Myers $ 129,144 $ 8,060 $ 225,929 (1)Mr. Ohlmacher's contributions of $88,443 are included in the Salary column of the Summary Compensation Table.(1) (2)The Company's contributions represent non-elective Supplemental Matching and Retirement Contributions and Supplemental Target Contributions (defined in the paragraph below) and are included in the Other Compensation column of the Summary Compensation Table.42 PROXY(3)Mr. Ohlmacher's earnings include $6,684 for dividend equivalents earned on unvested restricted stock units that is included in the All Other Compensation column of the Summary Compensation Table.Supplemental Matching Contribution Supplemental Retirement Contribution Supplemental Target Contribution David R. Emery — — — — Anthony S. Cleberg $ 19,532 $ 9,766 $ 122,666 $ 151,964 Linden R. Evans $ 25,565 $ 12,782 $ 134,215 $ 172,562 Steven J. Helmers $ 13,544 $ 7,566 $ 32,952 $ 54,062 Robert A. Myers $ 13,649 $ 6,824 $ 108,670 $ 129,143 (2) Because amounts included in this column do not include above-market or preferential earnings, none of these amounts are included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table. (4)Messrs. Cleberg's, Evans' and Helmers' aggregate balance at December 31, 2010 includes $100,347, $96,925 and $31,935,(3) Messrs. Cleberg’s, Evans’, Helmers’ and Myers’ aggregate balance at December 31, 2011 includes $252,312, $269,487, $85,997 and $215,874, respectively, which are included in the Summary Compensation Table as 2011 and 2010 Other Compensation. (5)Mr. Ohlmacher's aggregate balance at December 31, 2010 includes $95,127 and $252,529 which are also included in the Summary Compensation Table as 2010 and 2009 compensation, respectively. The balance does not include any amounts that were reported in the Summary Compensation Table as 2008 compensation.Plans'Plans’ benefits were frozen effective December 31, 2009,January 1, 2010, with non-elective supplemental matching contributions equal to 6 percent of eligible compensation in excess of the Internal Revenue Code limit plus matching contributions, if any, lost under the 401(k) Retirement Savings Plan due to nondiscrimination test results and provides non-elective supplemental age and service points-based contributions that cannot be made to the 401(k) Retirement Savings Plan due to the Internal Revenue Code limit ("(“Supplemental Matching and Retirement Contributions"Contributions”). It also provides supplemental target contributions equal to a percentage of compensation that may differ by executive, based on the executive'sexecutive’s current age and length of service with the Company,us, as determined by the plans'plans’ actuary ("(“Supplemental Target Contributions"Contributions”). Messrs. Cleberg, Evans, Helmers and HelmersMyers received Supplemental Target Contributions of 21.5 percent, 20.0 percent, and 7.0 percent and 23.0 percent, respectively.a trust accounthypothetical investment accounts where the participants may direct the investment of the deferrals (except for Company stock and restricted stock unit deferrals) as allowed by the plan. The investment options are the same as those offered to all employees in the 401(k) Retirement Savings Plan except for a fixed rate option which was set at 4.914.16 percent in 2010.2011. Investment earnings are credited to the participants'participants’ accounts. Upon retirement, we will distribute the account balance to the participant according to the distribution election filed with the Compensation Committee. The participants may elect either a lump sum payment to be paid within 30 days of retirement (requires a six month deferral for benefits not vested as of December 31, 2004), or annual or monthly installments over a period of years designated by the participant, but not to exceed 15 years.("CIC"(“CIC”) of the Company,us, as described below, (ii) pro-rata payout of incentive compensation and the acceleration of vesting of equity awards upon retirement, death or disability, and (iii) certain pension and nonqualified deferred compensation arrangements described under Pension Benefits for 20102011 and Nonqualified Deferred Compensation for 20102011 above, there are no agreements, arrangements or plans that entitle the Named Executive Officers to severance, perquisites, or other enhanced benefits upon termination of their employment. In addition, we have entered into a consulting agreement with Mr. Ohlmacher to advise us on certain matters after his retirement from the Company. See page 48 for a description of this consulting agreement. Any agreements to provide other payments or benefits to a terminating executive officer would be in the discretion of the Compensation Committee.PROXY 432010,2011, and thus include estimates of the amounts whichthat would be paid out to our Named Executive Officers upon their termination. The table does not include amounts such as base salary, short-term incentives and stock awards whichthat the Named Executive Officers earned due to employment through December 31, 20102011 and distributions of vested benefits such as those described under Pension Benefits for 2010,2011, Nonqualified Deferred Compensation for 20102011 and vested stock options listed in the Outstanding Equity Awards at Fiscal Year-End 20102011 tables. The table also does not include a value for outplacement services because this would be a de minimis amount. The actual amounts to be paid out can only be determined at the time of such Named Executive Officer'sOfficer’s separation from the Company. Cash
Severance
Payment Incremental
Retirement
Benefit
(present
value)(2) Continuation
of Medical/
Welfare Benefits
(present
value)(3) Acceleration
of Equity
Awards(4) Total
Termination
Benefits — — — $ 329,578 $ 329,578 — — — $ 1,070,218 $ 1,070,218 — — — — — — — — $ 1,099,651 $ 1,099,651 $ 3,049,800 $ 320,300 $ 172,300 $ 1,099,651 $ 4,642,051 — — — $ 156,942 $ 156,942 — — — $ 507,762 $ 507,762 — — — — — — — — $ 521,781 $ 521,781 $ 942,500 $ 454,118 $ 30,000 $ 521,781 $ 1,948,399 — — — $ 198,799 $ 198,799 — — — $ 630,619 $ 630,619 — — — — — — — — $ 648,368 $ 648,368 $ 1,080,000 $ 412,354 $ 109,700 $ 648,368 $ 2,250,422 — — — $ 198,799 $ 198,799 — — — $ 624,649 $ 624,649 — — — — — — — — $ 642,398 $ 642,398 $ 1,065,000 $ 196,800 $ 28,100 $ 642,398 $ 1,932,298 — — — $ 136,016 $ 136,016 — — — $ 430,346 $ 430,346 — — — — — — — — $ 442,494 $ 442,494 $ 784,000 $ 181,113 $ 48,400 $ 442,494 $ 1,456,007 Cash Severance Payment Total Termination Benefits David R. Emery • Retirement — — — $355,211 $355,211 • Death or disability — — — $1,197,968 $1,197,968 • Involuntary termination — — — — — • CIC — — — $1,192,518 $1,192,518 • $3,498,300 $462,500 $161,600 $1,192,518 $5,314,918 Anthony S. Cleberg • Retirement — — — $165,485 $165,485 • Death or disability — — — $549,640 $549,640 • Involuntary termination — — — — — • CIC — — — $550,716 $550,716 • $1,020,000 $580,780 $27,800 $550,716 $2,179,296 Linden R. Evans • Retirement — — — $204,472 $204,472 • Death or disability — — — $667,070 $667,070 • Involuntary termination — — — — — • CIC — — — $673,558 $673,558 • $1,248,000 $578,135 $101,600 $673,558 $2,601,293 Steven J. Helmers • Retirement — — — $139,469 $139,469 • Death or disability — — — $453,945 $453,945 • Involuntary termination — — — — — • CIC — — — $458,824 $458,824 • $826,000 $144,990 $34,900 $458,824 $1,464,714 Robert A. Myers • Retirement — — — $96,034 $96,034 • Death or disability — — — $358,831 $358,831 • Involuntary termination — — — — — • CIC — — — $359,943 $359,943 • $826,000 $445,063 $32,700 $359,943 $1,663,706 (1) The amounts reflected for involuntary or good reason termination after a change in control include the benefits a Named Executive Officer would receive in the event of a change in control as a sole event without the involuntary or good reason termination. (1)The amounts reflected for involuntary or good reason termination after a change in control include the benefits a Named Executive Officer would receive in the event of a change in control as a sole event without the involuntary or good reason termination.44 PROXY(2) Assumes that in the event of a change in control, Mr. Emery will receive an additional three years of credited and vesting service and the other Named Executive Officers will receive an additional two years of credited and vesting service towards the benefit accrual under their applicable retirement plans. For Mr. Emery this would be the Pension Plan and Nonqualified Pension Plans. For Messrs. Cleberg, Evans, Helmers and Myers this would be the Retirement Contributions and Nonqualified Deferred Compensation contributions. The benefits will immediately vest and payments will commence at the earliest eligible date unless the executive has elected a later date for the nonqualified plans. This is age 55 for Messrs. Emery, Evans and Myers. Because Messrs. Cleberg and Helmers are ages 59 and 55, respectively, they are already retiree eligible. (2)Assumes that in the event of a change in control, Mr. Emery will receive an additional three years of credited and vesting service and the other Named Executive Officers will receive an additional two years of credited and vesting service towards the benefit accrual under their applicable retirement plans. For Messrs. Emery and Ohlmacher this would be the Pension Plan and Nonqualified Pension Plans. For Messrs. Cleberg, Evans and Helmers this would be the Retirement Contributions and Nonqualified Deferred Compensation contributions. The benefits will immediately vest and payments will commence at the earliest eligible date unless the executive has elected a later date for the nonqualified plans. This is age 55 for Messrs. Emery, Evans and Helmers. Because Messrs. Cleberg and Ohlmacher are ages 58 and 59, respectively, they are already retiree eligible. In addition, Mr. Ohlmacher has made an election for his Pension Restoration benefit to begin on July 1, 2011 and his Pension Equalization Plan benefit to begin October 1, 2013.(3) Welfare benefits include medical coverage, dental coverage, life insurance, short-term disability coverage and long-term disability coverage. The calculation assumes that the Named Executive Officer does not take employment with another employer following termination, elects continued welfare benefits until age 55 or, if later, the end of the two year benefit continuation period (three years for Mr. Emery) and elects retiree medical benefits thereafter. Retirement is assumed to occur at the earliest eligible date. (3)Welfare benefits include medical coverage, dental coverage, life insurance, short-term disability coverage and long-term disability coverage. The calculation assumes that the Named Executive Officer does not take employment with another employer following termination, elects continued welfare benefits until age 55 or, if later, the end of the two year benefit continuation period (three years for Mr. Emery) and elects retiree medical benefits thereafter. Retirement is assumed to occur at the earliest eligible date. Mr. Ohlmacher is already eligible for retiree medical, therefore the only incremental value for retiree medical benefits in his results is the additional two years of employer credits to his retiree medical savings account.(4) In the event of retirement, death or disability, the acceleration of equity awards represents the acceleration of unvested restricted stock and the assumed payout of the pro-rata share of the performance shares for the January 1, 2010 to December 31, 2012 and January 1, 2011 to December 31, 2013 performance periods. We assumed a 91 percent payout of the performance shares for the January 1, 2010 to December 31, 2012 performance period and a 63 percent payout of target for the January 1, 2011 to December 31, 2013 performance period based on our Monte Carlo valuations at December 31, 2011. In the event of retirement, all unvested restricted stock is forfeited. (4)In the event of retirement, death or disability, the acceleration of equity awards represents the acceleration of unvested restricted stock and the assumed payout of the pro-rata share of the performance shares for the January 1, 2009 to December 31, 2011 and January 1, 2010 to December 31, 2012 performance periods. We assumed a 76 percent payout of the performance shares for the January 1, 2009 to December 31, 2011 performance period and a 96 percent payout of target for the January 1, 2010 to December 31, 2012 performance period based on our Monte Carlo valuations at December 31, 2010. In the event of retirement, all unvested restricted stock is forfeited.20102011 for the January 1, 2009 to December 31, 2011 and January 1, 2010 to December 31, 2012 and January 1, 2011 to December 31, 2013 performance periods.20102011, and the valuation of the performance shares was based on the average closing price of our common stock for the last 20 trading days of 2010.2011. Actual amounts to be paid out at the time of separation from the Companyus may vary significantly based upon the market value of our common stock at that time.Officer'sOfficer’s employment terminates, he or his beneficiaries may be entitled to receive amounts earned during his term of employment. These include:••••PROXY 45•••••••••a merger, consolidation, or reorganization;•liquidation or dissolution; or•an agreement for sale or other disposition of 50 percent or more of our assets, with exceptions for transactions which do not involve an effective change in control of voting securities or Board of Directors membership, and transfers to subsidiaries or sale of subsidiaries; and•- a merger, consolidation, or reorganization; - liquidation or dissolution; or - an agreement for sale or other disposition of 50 percent or more of our assets, with exceptions for transactions which do not involve an effective change in control of voting securities or Board of Directors membership, and transfers to subsidiaries or sale of subsidiaries; and which would triggerthat triggers payment of benefits is defined to include:•executive'sexecutive’s authority, duties or responsibilities;•executive'sexecutive’s annual compensation or any failure to pay the executive any compensation or benefits to which he or she is entitled within seven days of the date due;••("(“employment term"term”). During this employment term, the executive shallwill receive annual compensation at least equal to the highest rate in effect at any time during the one-year period preceding the change in control and shallwill also receive employment welfare benefits, pension benefits, and supplemental retirement benefits on a basis no less favorable than those received prior to the change in control. Annual compensation is defined to include amounts which are includable in the gross income of the executive for federal income tax purposes, including base salary, targeted short-term incentive, targeted long-term incentive grants and awards; and matching contributions or other benefits payable under the 401(k) Retirement Savings Plan; but exclude restricted stock awards, performance units or stock options that become vested or exercisable pursuant to a change in control.Officer'sOfficer’s employment is terminated prior to the end of the employment term by the Companyus for cause or disability, by reason of the Named Executive Officer'sOfficer’s death, or by the Named Executive Officer without good reason, the Named Executive Officer will receive all amounts of compensation earned or accrued through the termination date. If the Named Executive Officer'sOfficer’s employment is terminated because of death or disability, the Named Executive Officer or his beneficiaries will also receive a pro rata bonus equal to 100 percent of the target incentive for the portion of the year served.CEO'sCEO’s employment is terminated during the employment term (other than by reason of death) (i) by the Companyus other than for cause or disability, or (ii) by the CEO for a good reason, then the CEO is entitled to the following benefits:•CEO'sCEO’s beneficiaries would receive in the event of death or disability discussed above);•CEO'sCEO’s severance compensation defined as the CEO'sCEO’s base salary and short-term incentive target on the date of the change in control; provided that if the CEO has attained the age of 62 on the termination date, the severance payment shallwill be adjusted for the ratio of the number of days remaining to the CEO's 65thCEO’s 65th birthday to 1,095 days;•CEO'sCEO’s eligible dependents;•CEO'sCEO’s election) by paying the premiums charged to regular full-time employees for such coverage, and is eligible to continue receiving such coverage through the date of his retirement;•CEO'sCEO’s retiree medical savings account and the account balance will become fully vested and he is eligible to use the account balance to offset retiree medical premiums at the later of age 55 or the end of the three year continuation period;•Defined Benefit Pension Plan; and•theany non-CEO executive'sNamed Executive Officer’s employment is terminated during the employment term (other than by death) (i) by the Companyus other than for cause or disability, or (ii) by the non-CEO for a good reason;reason, then the non-CEO is entitled to the following benefits:•non-CEO'snon-CEO’s beneficiaries would receive in the event of death or disability discussed above);•non-CEO'snon-CEO’s severance compensation defined as the non-CEO'snon-CEO’s base salary and short-term incentive target on the date of the change in control; provided that if the non-CEO has attained the age of 63 on the termination date, the severance payment shall be adjusted for the ratio of the number of days remaining to the non-CEO's 65thnon-CEO’s 65th birthday to 730 days;•non-CEO'snon-CEO’s eligible dependents;•non-CEO'snon-CEO’s election) by paying the premiums charged to regular full-time employees for such coverage, and is eligible to continue receiving such coverage through the date of his retirement;•non-CEO'snon-CEO’s retiree medical savings account and the account balance will become fully vested and the non-CEO is eligible to use the account balance to offset retiree medical premiums at the later of age 55 or the end of the two year continuation period;•executivesexecutives’ applicable retirement plans; and•CONSULTING AGREEMENT On December 1, 2010, we entered into a Consulting Services Agreement (the "Agreement") with Mr. Ohlmacher and T.O.P., LLC ("T.O.P."). Mr. Ohlmacher is the managing member of T.O.P. and previously announced his plans to retire from the Company on March 31, 2011. The Agreement provides that from the date of his retirement until September 30, 2012 we will engage T.O.P. as an independent contractor and consultant, to advise us on strategic, project development and operating matters related to our regulated and non-regulated business activities. In compensation for services, including non-competition, avoidance of conflict and confidentiality, we will pay T.O.P. $143,750 on January 15, 2012 and $143,750 on September 30, 2012.48 PROXY3 The Company is"say“say on pay"pay”). Accordingly shareholders will vote on approval of the following resolution:Proxy Statement.takeconsider the outcome of the vote into account when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.Proxy Statement,proxy statement, we believe our executive compensation program is reasonable, competitive and strongly focused on pay for performance. The compensation of our Named Executive Officers varies depending upon the achievement of pre-established performance goals, both individual and corporate. Our short-term incentive is tied to earnings per share targets that reward our executives when they deliver targeted financial results. Our long-term incentives are tied to market performance with 50 percent delivered in restricted stock and 50 percent delivered in performance shares. Entitlement to the performance shares is based on our total shareholder return over a three-year performance period compared to our peer group. Through stock ownership guidelines, equity incentives and clawback provisions, we align the interests of our executives with those of our shareholders and theour long-term interests of the Company.interests. Our executive compensation policies have enabled us to attract and retain talented and experienced senior executives who can drive financial and strategic growth objectives that are intended to enhance shareholder value. We believe that the 20102011 compensation of our Named Executive Officers was appropriate and aligned with our 20102011 results and position for long-term growth.Proposal 4ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTEON OUR EXECUTIVE COMPENSATION The Company is required to seek an advisory, non-binding shareholder vote on the frequency of submission to shareholders of the advisory vote on executive compensation once every year, every two years or every three years. This vote is non-binding. The Board will review the voting results and expects to take the outcome of the vote into account when selecting the frequency of advisory votes on executive compensation. The Board of Directors recognizes the importance of receiving regular input from our shareholders on important issues such as executive compensation. Accordingly, the Board is recommending that shareholders vote for the option of every year as the frequency with which shareholders will have a "say on pay". The Board believes that an annual advisory vote on executive compensation is consistent with the Company's policy of seeking input from, and engaging in discussions with, our shareholders on corporate governance matters. The Board understands that thoughtful analysis of executive compensation can be time consuming for shareholders and that it may be difficult to assess the impact of any changes to our compensation practices within a one-year period. Accordingly, the BoardPROXY 49understands that shareholders may have different views on the appropriate frequency for the "say on pay" vote and looks forward to receiving input on this matter. Although the Board is recommending shareholders vote for the option of every year, for purposes of this proposal, shareholders are entitled to vote for any of the frequency alternatives and you are not voting on the Board's recommendation. The Company will report its determination about the frequency of the advisory vote on executive compensation in a Form 8-K or amendment to a Form 8-K filed within 150 days following the meeting.The Board of Directors recommends a vote for the option ofONE YEAR as the frequency with which shareholders will have an advisory, non-binding vote on executive compensation.20122013 ANNUAL MEETING20122013 annual meeting of shareholders and considered for inclusion in our proxy materials must be received by our Corporate Secretary in writing at our executive offices at 625 Ninth Street, P.O. Box 1400, Rapid City, South Dakota 57709,57701, on or prior to December 15, 2011.November 22, 2012. Any proposal submitted must be in compliance with Rule 14a-8 of Regulation 14A of the Securities and Exchange Commission.20122013 annual meeting of shareholders, but not for inclusion of the proposal in our proxy materials, if the shareholder gives timely written notice of such proposal in accordance with Article I, Section 9 of our Bylaws. In general, Article I, Section 9 provides that, to be timely, a shareholder'sshareholder’s notice must be delivered to our Corporate Secretary in writing not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of shareholders.20112012 annual meeting is scheduled for May 25, 2011.23, 2012. Ninety days prior to the first anniversary of this date will be February 25, 2012,22, 2013, and 120 days prior to the first anniversary of this date will be January 26, 2012.23, 2013. For business to be properly requested by the shareholder to be brought before the 20122013 annual meeting of shareholders, the shareholder must comply with all of the requirements of Article I, Section 9 of our Bylaws, not just the timeliness requirements set forth above."householding,"“householding,” is designed to reduce our printing and postage costs. However, if a shareholder of record residing at such an address wishes to receive a separate annual report or proxy statement in the future, he or she may contact Shareholder Relations at the below address. Eligible shareholders of record receiving multiple copies of our annual report and proxy statement can request householding by contacting us in the same manner. Shareholders who own shares through a bank, broker or other nominee can request householding by contacting the nominee.50 PROXYP.O. Box 140057709
577012010,2011, which is required to be filed with the Securities and Exchange Commission, will be made available to shareholders to whom this Proxy Statementproxy statement is mailed, without charge, upon written or oral request to Shareholder Relations, Black Hills Corporation, P.O. Box 1400,625 Ninth Street, Rapid City, SD 57709,57701, Telephone Number: (605) 721-1700. Our Annual Report on Form 10-K also may be accessed through our website at www.blackhillscorp.com.25, 201123, 201220102011 Annual Report to Shareholders over the Internet by accessing our website at www.blackhillscorp.com.www.blackhillscorp.com. Information on our website does not constitute a part of this proxy statement.By Order of the Board of Directors,ROXANN R. BASHAMVice President—Governance and Corporate SecretaryDated: April 13, 2011PROXY 5125, 201120102011 Annual Report to Shareholders are available at www.blackhillscorp.com.www.blackhillscorp.com.Black Hills Corporation P.O. Box 1400,625 Ninth Street, Rapid City, SD 57709PROXY 25, 2011.23, 201225, 2011,23, 2012, at The Dahl Arts Center, 713 Seventh Street, Rapid City, SD 57701, and at any adjournment thereof, upon all subjects that may properly come before the meeting, including the matters described in the Proxy Statement furnished herewith.24, 2011.24, 2011.and 3 and FOR the option of One Year on Item 4.1. Election of Directors: 01 Michael H. Madison all nominees from all nominees 02 Steven R. Mills (except as marked) 03 Stephen D. Newlin the number of the nominee and the number of shares for such nominee in the box provided to the right.) ForAgainstAbstain2.For Against Abstain 2. Authorize an increase in the Company's authorized indebtedness from $2 billion to $4 billion. For Against Abstain 3. Ratify the appointment of Deloitte & Touche LLP to serve as Black Hills Corporation’sCorporation's independent registered public accounting firm for 2011.2012.oooForAgainstAbstain3.Approve the advisory resolution on executive compensation.ooo1 Year2 Years3 YearsAbstain4.Approve holding the advisory vote on executive compensation every one, two or three years, as indicated.ooooFor Against Abstain 4. Advisory resolution to approve executive compensation. 1, 21,2,3 AND 3 AND FOR ONE YEAR ON ITEM 4.Address change? Mark BoxIndicate changes below:oDateSignature(s) BoxPlease sign exactly as your name(s) appear on Proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.Address change? Mark Box ¨ Indicate changes below: Date ___________________________________________